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Full text of "North Carolina Register v.10 no. 16a (11/15/1995)"

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NORTH CAROLINA 

REGISTER 



VOLUME 10 • ISSUE 16A« Pages 1651 - 1827 
November 15, 1995 



IN THIS ISSUE 

Administration 

Agriculture 

Commerce 

Human Resources 

Insurance 

Justice 

Labor 



PUBLISHED BY 

The Office of Administrative Hearings 
Rules Division 
PO Drawer 27447 
Raleigh, NC 27611-7447 
Telephone (919) 733-2678 
Fax (919) 733-3462 





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r/iw publication is printed on permanent, acid-free paper in compliance with G.S. 125-1 1. 13 



INFORMATION ABOUT THE NORTH CAROLINA REGISTER AND ADMINISTRATIVE CODE 



NORTH CAROLINA REGISTER 

The North Carolina Register is published twice a month and 
contains information relating to agency, executive, legislative and 
judicial actions required by or affecting Chapter 150B of the 
General Statutes. All proposed administrative rules and notices of 
pubhc heanngs tiled under G.S. 1508-21. 2 must be pubUshed in 
the Register. The Register wiU t^-pically comprise approximately 
fift)' pages per issue of legal text. 

State law requires that a copy of each issue be provided free of 
charge to each count>' m the state and to various state officials and 
institutions. 

The North Carolina Register is available by yearly subscription 
at a cost of one hundred and ninety five dollars (S 195.00) for 24 
issues. Individual issues may be purchased for ten dollars 
($10.00). 

Requests for subscription to the North Carolina Register should 
be directed to the Office of Admimstrative Heanngs, PO Drawer 
27447, Raleigh. NC 27611-7447. 

ADOPTION, AMENDMENT, AND REPEAL OF RULES 

The following is a generalized statement of the procedures to be 
followed for an agency to adopt, amend, or repeal a rule. For the 
specific statutor\' authontj-, please consult Article 2A of Chapter 
150B of the General Statutes. 

Any agency intending to adopt, amend, or repeal a rule must 
first publish notice of the proposed action m the North Carolina 
Register. The notice must include the time and place of the pubhc 
hearing (or instructions on how a member of the pubhc may 
request a hearing): a statement of procedure for pubhc comments; 
the text of the proposed rule or the statement of subject matter; the 
reason for the proposed action; a reference to the statutory' 
authority' for the action and the proposed effective date. 

Unless a specific statute provides otherwise, at least 15 days 
must elapse following pubhcation of the notice in the North 
Carolina Register before the agency may conduct the pubhc 
hearing and at least 30 days must elapse before the agency can take 
action on the proposed rule. An agency may not adopt a rule that 
differs substantially from the proposed form pubhshed as part of 
the pubhc notice, untU the adopted version has been pubhshed in 
the North Carolina Register for an additional 30 da)' comment 
penod. 

When final action Ls taken, the promulgating agency must file the 
rule with the Rules Review Commission (RRC). After approval 
by RRC, the adopted rule is filed with the Office of Admimstrative 
Hearings (OAH). 

A rule or amended rule generally becomes effective 5 business 
days after the rule is tiled with the Office of Administrative 
Hearings for pubhcation in the North Carohna Administrative 
Code (NCAC). 

Proposed action on rules may be withdrawn b)' the promulgating 



agency at any time before final action is taken by the agency or 
before fihng with OAH for pubhcation in the NCAC. 

TEMPORARY RULES 

Under certain emergency conditions, agencies may issue 
temporary rules. Within 24 hours of submission to OAH, the 
Codifier of Rules must review the agency's written statement of 
findings of need for the temporary rule pursuant to the provisions 
in G.S. 150B-21.1. If the Codifier determines that the findings 
meet the criteria in G.S. 150B-21.1, the rule is entered into the 
NCAC. If the Codifier determines that the findings do not meet 
the critena. the rule is returned to the agency. The agency may 
supplement its findings and resubmit the temporary rule for an 
additional review or the agency may respond that it will remain 
with its initial position. The Codifier, thereafter, will enter the 
rule into the NCAC. A temporarv' rule becomes effective either 
when the Codifier of Rules enters the rule in the Code or on the 
sixth busmess day after the agency resubmits the rule without 
change. The temporarj' rule is in effect for the period specified in 
the rule or 180 days, whichever is less. An agency adopting a 
temporar>' rule must begin rule-making procedures on the 
permanent rule at the same time the temporar}' rule is filed with 
the Codifier. 

NORTH CAROLINA AD^^NISTRATIVE CODE 

The North Carohna Admimstrative Code (NCAC) is a 
compilation and index of the administrative rules of 25 state 
agencies and 40 occupational licensing boards. Compilation and 
pubhcation of the NCAC is mandated by G.S. 1508-21.18. 

The Code is di\ided into Tides and Chapters. Each state agency 
is assigned a separate title which is further broken down by 
chapters. Title 21 is designated for occupational licensing boards. 
The NCAC is available m two formats. 

(1) Single pages may be obtained at a minimum cost of 
two dollars and 50 cents ($2.50) for 10 pages or less, 
plus fifteen cents ($0.15) per each additional page. 
Requests for pages of rules or volumes of the NCAC 
should be directed to the Office of Administrative 
Hearings. 

(2) The full publication and supplement service is printed 
and distributed by Barclays Law Pubhshers. It is 
available m hardcopy, CD-ROM and diskette format. 
For subscription information, call 1-800-888-3600. 

CITATION TO THE NORTH CAROLINA REGISTER 

The North Carolina Register is cited by volume, issue, page 
number and date. 10:01 NCR 1-67, April 3. 1995 refers to 
Volume 10. Issue 1. pages 1 through 67 of the North Carolina 
Register issued on April 3, 1995. 



FOR INFORMATION CONTACT: Office of Administrative Hearings. ATTN: 
NC 27611-7447. (919) 733-2678, FAX (919) 733-3462. 



Rules Division. PO Drawer 27447, Raleiiih. 



> 



NORTH CAROLINA 



IN THIS ISSUE 




I 



Volume 1 0p Issue 1 
Pages 1651 - 1827 

November 15, 1995 



This issue contains documents officially filed 
through October 31, 1995. 



Office of Administrative Hearings 

Rules Division 

424 North Blount Street (27601) 

PO Drawer 27447 

Raleigh, NC 27611-7447 

(919) 733-2678 

FAX (919) 733-3462 



PROPOSED RULES 
Administration 

Administration's Minimum Criteria 1672-1674 

Purchase and Contract 1651 - 1672 

Agriculture 

Pesticide Board 1674- 1675 

Commerce 
Alcoholic Beverage Control Commission .... 1675-1698 
Community Assistance 1698-1708 

Human Resources 

Blind, Services for the 1708- 1716 

Medical Assistance 1721 - 1723 

Social Services 1724- 1732 

Vocational Rehabilitation Services 1716-1721 

Insurance 

Agent Services Division 1738-1751 

Consumer Services Division 1732-1738 

Financial Evaluation Division 1751 - 1762 

Life and Health Division 1762- 1795 

Seniors' Health Insurance Information 

Program 1786- 1787 

Third Party Administrators 1795- 1796 

Justice 
Criminal Justice Education and Training 

Standards 1797- 1799 

Private Protective Services 1796-1797 

Labor 

Elevators and Amusement Devices 1827 

Mine and Quarry Division 1799 

OSHA 1800- 1827 



I 



Julian Mann III, Director 

James R. Scarcella Sr., Deputy Director 

Molly Masich, Director of APA Services 

Ruby Creech, Publications Coordinator 

Teresa Kilpatrick, Editorial Assistant 

Jean Shirley, Editorial Assistant 



c 



Digitized by the Internet Archive 

in 2011 with funding from v 

University of North Carolina at Chapel Hill 



( 

http://www.archive.org/details/northcarolinareg1016nort 



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PROPOSED RULES 



TITLE 1 - DEPARTMENT OF 
ADMINISTRATION 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the Department of Administration, 
Division of Purchase and Contract intends to adopt rules 
citedas 1 NCAC 5A .0012; 5B .0103. .0210, .0314, .0503, 
.1108, . 1516 - . 1521. . 1803 - . 1804; amend rules cited as 
1 NCAC5A .0001 - .0002. .0004; 5B .0101 - .0102, .0201, 
.0203 - .0204, .0206 -.0208, .0301 - .0310, .0312 - .0313, 
.0401 - .0403, .0501 - .0502. .0601 - .0602. .0701. .0801. 
.0901 -.0902, .0904 -.0906, .1001 - .1003, .1101, .1201, 
.1301 - .1302, .1401 - .1402. .1501, .1504- .1513, .1601 

- .1603, .1701 - .1702, .1901, .1903, .1906 - .1907, .1909; 
5C .0101 - .0102, .0201 - .0204, .0208, .0211, .0217 - 
.0218, .0220, .0222, .0303 - .0304, .0403, .0508; 5D .0101 

- .0102, .0201 - .0206, .0208 - .0210; and repeal rules 
cited as 1 NCAC 5 A .0009 - .0010; 58 .0209, .0311, .0404, 
.0702, .0802 - .0808, .0810, .1103 - .1104, .1106, .1202, 
.1403, .1502 - .1503, .1703; 5C .0509; 5D .0301 - .0303. 
.0401 - .0403. .0501 - .0509. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 3:00 pm on Novem- 
ber 30. 1995 at the Administration Building. Commission 
Room 5034, 116 West Jones Street. Raleigh. NC 27603. 

Reason for Proposed Action: To address statutory 
changes, and to address the flexibility required to enhance 
the ability of the State to administer an effective governmen- 
tal purchasing program. 

Comment Procedures: Any interested person may present 
his/her comments either in writing at the hearing or orally 
at the hearing. All comments must be received by the 
agency no later tlian December 15, 1995. Any person may 
request information, permission to be heard or copies of the 
proposed regulations by writing or calling R. den Peterson, 
Department of Administration, 116 West Jones Street, 
Raleigh, NC 27603-8003. Phone: (919) 733-7232. 

Fiscal Note: Ttiese Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 5 - PURCHASE AND CONTRACT 

SUBCHAPTER 5A - DIVISION OF PURCHASE AND 
CONTRACT 

.0001 RESPONSIBILITY 

The Department of Administration is responsible for 
administering the state's program for the acquisition and 
management acquisition, management, and disposal of 
personal property. The Secretary of the Department of 
Administration (Secretary) is authorized and responsible for 
adopting and carrying out the rules promulgated herein. 



The administration of this program is the rosponsibility of 
delegated to the State Purchasing Officer (SPO) who reports 
to the Secretary of th e D e partm e nt of Administration . 

Statutory Authority G.S. 143-49. 

.0002 SCOPE 

The program administered by the Division of Purchase and 
Contract is based on sound competitive purchasing proce- 
dures, sound management of personal property, and the 
economical disposal of State property; and includes the 
following where public funds are involved: 



(1) 



(2) 



(3) 



(4) 

(5) 
(61 



acquisition by purchase, oxchango. loaoo purchaao. 
l e as e — or r e ntal of equipment, materials, and 
supplies, printing and s e r i 'io e s by for all agencies 
state dcpartmcnta, institutions, authorities, boards, 
commi ss ions, and — agoncios ; 
acquisition by purchase or e xchang e of all e quip 
mont. mat e rial s and s upplies by — oity and county 
boards of education. — community collegos and 
technical in s titutes; printing, rentals, leases and 
services for all agencies, except for community 
colleges and local school administrative units; 
making certain purchasing services available to 
charitable nonprofit hospital, fire department s and 
r es cu e s quad s ; certain non-state agencies; 
establishment and enforcement of purchase specifi- 
cations; 

inspection and testing of product s , products; 
review of agency purchasing and warehousing 
practices to ensure compliance with operating 
rules and procedures established by the SPO. 



Statutory Authority G.S. 143-49; 143-53; 143-56; 143-60. 

.0004 LOCATION 

The principal offices of the Division of Purchase and 
Contract are located in the Administration Building, 1 16 
West Jones Street, Raleigh, N.C. 354H- 27603-8002 . 

Statutory Authority G.S. 143B-10. 

.0009 BOARD OF AWARD 

The Advisory Budget Commission designates two or more 
members to servo a s a Board of Award for canvassing bids 
and r e comm e nding th e award of contract s to th e Socrotar)' 
of Administration. — Th e oommiosion furth e r d e signat e s th e 
following state employee s who can s ervo in thi s capacity in 
the absence of membor( s ) of the Commi ss ion: 

Controll e r, Stat e Board of Education 

State Treasurer 

Secretary of State 

Representative from Attorney General's Office. 
These alternat e m e mbers shall not furth e r d e l e gat e this 
r e sponsibility. Th e board normally m ee t s w ee kly. 

Bids aro reviewed only by the Division of Purchase and 
Contract, the Board of Award and the Secretary of Adminis 



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tmtion. Rocordfl aro kopt of each mooting and made public 
by th e Stnt e Purohosing Offic e r. 

Statutory Authority G.S. 143-53. 

,0010 ADMINISTRATIVE PROCEDURES 

Rule making, — doolarntor)' — rulingo and oontootod oao e 
bearings aro govomod by the provisions of 1 NCAC IB- 
Prior to roquo8ting a oontoGtod caso hearing, parties shall 
negotiate th e ir complaint with th e Stat e Purohaoing Offioor. 
A d e oioion shall bo ioou e d by the Stat e Purchasing Offic e r 
within 30 days and io required in ordor to roquost a hearing. 

Statutory Authority G.S. 150B-2: 150B-22; 150B-23. 

.0012 DEFINITIONS 

(a) For the purpose of this Chapter, agency is defined as 
meaning all departments, institutions, boards, commissions. 
or other units of the State, and community colleges and 
local school administrative units, unless specifically ex- 
empted herein by reference. 

(b) A service contract shall mean any agreement in which 
an independent contractor performs services requiring 
specialized knowledge, experience, expertise or similar 
capabilities for a state agency for compensation from state 
fiinds. The services may include (by way of illustration, not 
limitation) services such as maintenance of buildings or 
equipment, auditing, film production, employee training and 
food services, provided that the service is not primarily for 
review, analysis or advice in formulating or implementing 
improvements in programs or services (in which case rules 
relating to consultants shall be applicable). 

(c) Where the term "offer" is used, it refers to a bid, 
proposal or offer submitted in response to an Invitation for 
Bids, Request for Proposals. Negotiation, or Request for 
Quotations. 

(d) Where "procedures" or "guidelines" are referred to 
herein, the context of such are incorporated in the N.C. 
Purchasing Manual which can be obtained from the Division 
of Purchase and Contract. 

Statutory Authority G.S. 143-49; 143-53. 

SUBCHAPTER SB - PURCHASE PROCEDURES 

SECTION .0100 - REQUISITIONING 

.0101 PROCEDURE 

Using agencies shall request quotation, bid and purchase 
actions of the Division of Fhjrchase and Contract by means 
of written r e quisitions. — A sp e cial form is us e d for this 
purpose requests . 

Statutory Authority G.S. 143-49; 143-51; 143-55. 

.0102 VERBAL REQUESTS 

Verbal or other means of request are not satisfactory 



substitutes for a written requisition requests except in 
emergencies. Written confirmation must follow any such 
request made in an emergency situation. 

Statutory Authority G.S. 143-49; 143-51; 143-55. 

.0103 CONFIDENTIALITY 

All information and documentation relative to the develop- 
ment of a contractual document (Request for Quotation. 
Invitation for Bids, Request for Proposals. Waiver of 
Competition, Negotiation, etc.) for a proposed procurement 
or contract shall be deemed confidential in nature, except as 
deemed necessary by the purchaser to develop a complete 
contractual document. Such material shall remain confiden- 
tial until the award of contract (See Rules .0210. .0309. 
.1501 and .1518 of this Subchapter). 

Statutory Authority G.S. 133-33; 143-53; 143-60. 

SECTION .0200 - SPECIHCATIONS 

.0201 TYPES OF SPECIFICATIONS 

Th e r e ar e two general tj'p e o of purohaso opooifioationo. 
Ono is a standard specification either developed by the 
standards section of the Division or aa a roault of develop 
mental work of othoro with modifioation ao neooooar)' to 
m ee t the state's needs. — Tho other t)'po involv e s items of 
equipment, materials or supplies which by their nature do 
not lend themselves to standard specification or for which a 
standard sp e cification has not yet boon prepared. — The 
requesting ag e ncy customarily d e v e lops the latt e r or offers 
a spKiciFioation roforonoe to which modifications and revi 
sions 09 necessary are made by tho Division of Purchase 
Contmot, ouch speoifioations ar e g e n e rally used for individ 
uol purohoe e s and may or may not bo suitable for ropot i tive 
ttser There are two general types of purchase specifications. 
A standard specification is originated and developed by the 
Standards Section. It is comprehensive in nature and 
intended for repeated use. The other type of specification 
is customarily originated by the requesting agency and 
modified as necessary by the Division of Purchase and 
Contract. It is^ b^ the nature of the commodity or pattern 
of user demand, not intended for repetitive use. Sometimes, 
such other type specifications may be presented in the form 
of "brand name or equal" or. with satisfactory justification, 
in the form of "brand name only." 

Statutory Authority G.S. 143-49(2); 143-53. 

.0203 DEVELOPMENT OF SPECIFICATIONS 

A standard specification is intended for general use, 
applicable insofar as practicable to the needs of state 
departments, institutions and agencies and kept currently 
applicabl e to r e vision and modifioation current by the 
Standards Section . In formulating such a specification, 
advisory committees made up of personnel from various 
state agencies, institutions, public schools and the private 



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PROPOSED RULES 



sector are often employed for advice and assistance. This 
type of specification is customarily offered also for the 
review and comments of manufacturers and suppliers who 
may participate in future bidding on the items in question. 

Statutory Authority G.S. 143-49(2); 143-53. 

.0204 ARTICLES FOR SPECIAL PURPOSES 

Where articles are to be used for educational or training 
purposes, purpocoo or by handicapped persons, or for test 
and evaluation or research purposes, special or overriding 
consideration may be given to the factor of suitability in the 
preparation of specifications, the evaluation of propo s al s 
offers, for waiver of competition, and the award of con- 
tracts. 

Statutory Authority G.S. 143-49(2); 143-53. 

.0206 SUBMISSION FOR ADOPTION 

Upon completion of all necessary studies, reviews and 
drafts, any proposed standard specification is submitted to 
the Stato Purohaoing Offic e r SPO for consideration and 
recommendation to the Secretary of Adminiatration . When 
a specification is adopted as a standard, it becomes applica- 
ble to state purchases generally. A standard specification 
may be modified by the Division of Purchase and Contract 
on an interim basis as deemed necessary or advantageous 
until such time as the Secretary of Administration can 
consider the proposed revision. 

Statutory Authority G.S. 143-49(2); 143-53. 

.0207 COPIES OF SPECIFICATIONS 

Copies of standard specifications are customarily distrib- 
uted among interested bidders and in addition are available 
for public inspection at the Division office, 116 Wost Jones 
Street, Raloigh, North Carolina of Purchase and Contract or 
through available electronic media . Copies of standard 
specifications may be provided interested parties. A fee 
8or » 'ico charge for duplicating may be charged. 

Statutory Authority G.S. 143-49(2); 143-53. 

.0208 QUALIFIED PRODUCTS LIST 

A qualified products list (QPL) is a type of specification 
which may or may not be adopted as a standard. The 
essential characteristic of this procedure is the examination 
and prequalification of brands and models of products on the 
basis of samples and tests. The prequalification limits 
bidding to products included on the list (QPL) at th e time 
bids ar e r e quest e d . This procedure has a continuing aspect 
such that manufacturers are invited annually or at various 
times to submit products for evaluation and inclusion on the 
list. Customary sources for manufacturers are the Divi- 
sion's active bidder mailing lists and notifications of interest 
received in advance from other firms. The Division 
normally imposes a deadline for submission of samples. If 



a product is added to the list, it is then eligible to be offered 
against subsequ e nt roquoots an Invitation for bids Bids . 

Statutory Authority G.S. 143-49(2); 143-53. 

.0209 ON-SITE INSPECTION OF GOODS 

Th e r e Bponsibilit)' for on oito inop e otion of it e mo purchased 
through the Division of Purchase and Contract is oxoreisod 
by the standards and inspection section of the Division of 
Purchas e and Contract. — Any t e sts on n e w produoto or 
syst e ms should b e coordinat e d with this Sootion. 

Statutory Authority G.S. 143-49(2); 143-53; 143-49; 143-60; 
143B-397, 143B-398. 

.0210 CONFIDENTIALITY 

All information and documentation relative to the develop- 
ment of a specification shall be deemed confidential in 
nature until the adoption of that specification or an award of 
contract if developed for a specific procurement or contract, 
whichever is later. (See Rules .0210, .0309, .1501 and 
.1518 of this Subchapter.) 

Statutory Authority G.S. 133-33; 143-53; 143-60. 



SECTION .0300 



COMPETITIVE BID/PROPOSAL 
PROCEDURE 



.0301 SOLICITATION OF SEALED BIDS 

Where the total requirements for any given commodity 
involve an expenditure in excess of fiv e thousand dollars 
($5,000) the expenditure benchmark established under the 
provisions of G.S. 143-53. 1. and where the competitive 
bidding procedure is employed, sealed bids are solicited by 
direct mailing and by advertisement in a newspaper of 
statewide circulation or by electronic media when deemed 
more advantageous for certain items or commodities at least 
10 days prior to the date designated for opening of the bids. 

Statutory Authority G.S. 143-52; 143-49; 143-53.1. 

.0302 MAILING LISTS 

TTie Division of Purchase and Contract maintains activ e 
bidders mailing lists for the purpose of soliciting bids offers 
on various categories of commodities and services. A form 
is available upon request as an application to be included on 
an appropriate bidd e r s list. Inquiries should b e dir e ct e d to 
the Division of Purchase and Contract, — 1 16 West Jones 
Street, Raloigh, North Carolina 27611. 
Prospootivo bidders Companies may be added to or removed 
from these lists after taking into consideration financial 
standing and responsibility, facilities for production^ 
distribution and services, length of time successfully in 
business, rosponsivoneso — as — a — bidd e r, responsiveness, 
performance as a supplier, the need for competition, the 
budgeted amounts for maintaining the lists and for duplicat- 
ing and mailing and other such factors as may be pertinent 



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1653 



PROPOSED RULES 



and reasonable. 

Only aotivo biddoro companies responsive to solicitations 
are retained on th e activ e bidd e rs mailing iist lists . 

It is not always economically feasible or otherwise 
practicable to sond roquosts for bids to all poraonB on — tb© 
activ e bidd e rs use the entire mailing list. In such cases, the 
Division may roqu e ot bido from use those p e roono companies 
on tho active biddors mailing liat who may reasonably and 
practically be expected to reply. 

Statutory Authority G.S. 143-52; 143-49. 

.0303 TELEGRAPH, FACSIMILE, AND 
TELEPHONfE OFFERS 

Tolograph or Telegraph, facsimile, and telephone bids or 
proposals may bo conaidorod if rocoivod prior to sfKwifiod 
opening time and provided thoy aro oonfirmod in writing 
within a roaoonablo and aoooptablo time th e r e aft e r; provid e d, 
how e v e r, that t e lephon e bids are oonfirmod by t e l e gram s e nt 
prior to tho timo of bid oponing are not acceptable in 
response to sealed competitive bids or proposals . 

Statutory Authority G.S. 143-52; 143-49. 

.0304 RECALL OF OFFERS 

Sids Offers may be recalled prior to opening upon signed 
request from an authorized agent of the company bidding 

Statutory Authority G.S. 143-52; 143-49. 

.0305 PUBLIC OPENING 

Advertised bids procurements are publicly op>onod opened, 
in accordance with the procurement document instructions, 
and the names of the biddoro companies , the manufacturer(s) 
and catalog numbers(s) of the item(s) they have offered and 
the prices, deliveries and payment terms they have submit- 
ted become pubUc records subject to the provisions of Rul e 
Rules .0309 and .1501 of this S e ction Subchapter . 

Statutory Authority G.S. 143-52; 143-49. 

.0306 LATE OFFERS, MODIFICATIONS, 
OR WTTHDRAWALS 

Lato bids may bo considorod prior to award only if it can 
be ofioertained that th e delay wao not th e fault of th e bidd e r, 
that th e bidd e r could hav e had no knowledg e of pric e s as a 
result of tho oponing and that doing so sor^'os tho best 
interest of tho state. Tho State Purchasing Officer shall look 
into th e faota of ouch ooooo with det e rmination of any ouch 
aooeptabilit)' to b e made under tho proo e dur e for oanvaooing 
bids and awarding contracts. No late offer, late modifica- 
tion, or late withdrawal will be considered unless received 
before contract award, and the offer, modification, or 
withdrawal would have been timely but for the action or 
inaction of State personnel directly serving the procurement 
process. It is the sole responsibility of the offeror to have 



their offer delivered on time, regardless of the mode of 
delivery used, including the LL S^ Postal Service or any 
other delivery services available. 

Statutory Authority G.S. 143-52; 143-49. 

.0307 ERROR/CLARIFICATION 

When a bid an offer appears to contain an obvious error 
or otherwise where an error is suspected, the circumstances 
may be investigated and then may be considered and acted 
upon under the current operating procedures proooduro for 
canvassing bids and awarding contracts ; any action taken, 
however, shall not prejudice the rights of the public or other 
bidders offering companies . Where bids offers are submit- 
ted substantially in accordance with the invitation procure- 
ment document but are not entirely clear as to intent or to 
some particular fact or where there are other ambiguities, 
clarification may be sought and accepted provided that, in 
doing so, no change is permitted in prices, which would 
improve the competitive position of tho bid and alter tho 
award of tho contract. 

Statutory Authority G.S. 143-52; 143-49. 

.0308 EXTENSION OF ACCEPTANCE TIME 

When in the public interest, bidd e rs companies may be 
requested to extend the time offered for the acceptance of 
proposals and auppliors may bo requested to extend the 
scheduled tormination dates of contracts offers. 

Statutory Authority G.S. 143-52; 143-49. 

.0309 EVALUATION 

In determining the award of contracts, bona fide proposals 
offers will be considered and evaluated as provided by 
statute and applicable rules and rogulations . Unexecuted 
offers or an offer without delivery will not be accepted. 
Nonacceptance of an offer a proposal is not to be construed 
as outright rejection or that it lacks merit but that another is 
deemed more advantageous. During the period of evalua- 
tion and prior to award, possession of the bids offers and 
accompanying information is limited to p e rsonn e l of tho 
Division of Purchas e and Contract persons designated by the 
SPQ. and to those in using agencies who are responsible for 
participating in the evaluation. Vendor participation may bo 
sought wh e r e oomo clarification of a proposal is n e o e osary 
for proper e valuation; and in doing so, no improv e m e nt in 
tho bidder's compwtitivo position is pvormissiblo. After 
award of the contract, the complete bid file is available to 
any interested person with the exception of trade o e or e to tost 
information or similar propri e tary information as provided 
by statute and rule secrets subject to the provisions of Rules 
.1501 and .1518 of this Subchapter . 

Statutory Authority G.S. 143-52; 143-49; 143-53. 

.0310 NOTinCATION OF AWARD 



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Advortiood procuromontB are awarded under procoduroa 
ootabliohod by the Soorotar>' of Admiruotration. After 
contracts are awarded, successful bidd e rs c ompanies and 
agencies are notified by letter of accoptanoo or by purchase 
order aa appropriate, in writing or electronically. 

Statutory Authority G.S. 143-52; 143-49. 

.0311 GOODS REQUIREVG IMMEDIATE 
ACCEPTANCE 

In the purchas e of it e mo which ar e subj e ct to rapid pric e 
fluctuation or immediate acceptance, the State Purchasing 
Officer may award contracts as ho dooms advisable provided 
that each such action io mad e a matt e r of r e cord and 
reported promptly to th e Board of Award. 

Statutory Authority G.S. 143-52; 143-49. 

.0312 LACK OF COMPETITION 

The purpose of soliciting bids offers is both to seek and to 
obtain competition; the responsibility is dual. Where only 
a single bid offer or a single acceptable bid offer is received 
or, otherwise, where reasonable and available competition 
is not obtained, the reason shall be ascertained and made a 
matter of record. 

Statutory Authority G.S. 143-52; 143-49. 

.0313 TABULATIONS AND ABSTRACTS 

Telephone, electronic, and written requests R e qu e sts for 
detailed or written tabulations and abstracts of bids offers 
cannot be honored. 

Statutory Authority G.S. 143-52; 143-49; 143-53. 

.0314 REQUEST FOR PROPOSALS 

(a) An alternate acquisition method to the Invitation for 
Bid is a Request for Proposal rRFP). 

(1) For the purchase of equipment, materials and 
supplies (commodities) the rules of this Chapter 
a pply; 

(2) In addition to the rules of this Chapter applying 
to the procurement of services, specific purchas- 
ing procedures and guidelines for service 
cotnracts are prescribed and published by the 
SPO. 

£b} A RFP can also be handled as a two step process. 
Where a two step process is used only the technical proposal 
is opened on the opening date. The cost proposal is opened 
only if the technical proposal is determined by the State to 
be acceptable. 



.0401 GENERAL DELEGATION 

In making purchases of commodities not covered by state 
term contracts and estimated to be less than fiv e thousand 
dollars ($5,000) the expenditure benchmark established 
under the provisions of G.S. 143-53.1 . the State Purchasing 
Offic e r SPO may obtain e ith e r authorize agencies under a 
general delegation to make those purchases ' ■ ' e rbal or writt e n 
quotations depending upon the nature and typo of the 
purchase . These purchases are subject to the specific 
guidelines given in Rule .1603 of this Chapter and other 
basic purchasing procedures in this Chapter. Purchasing 
procedures and guidelines specific for services delegated to 
the agencies are prescribed and published by the SPO. This 
procedure does not r e quir e public advertising nor th e public 
op e ning of proposals r e c e iv e d. 

Ifl — seeking competitive propnjsals on or otherwise in 
making purchases e s timated to be loss than five thousand 
dollars ($5,000), th e Stat e Purchasing Offic e r may proc ee d 
in aooordonoe with good purchasing practic e s and with or 
without public adverti s ement. 

^Tierovor — possible, — however, — several — proposals — are 
obtain e d from representativ e suppli e rs bas e d on previous 
e xp e ri e nc e and knowledge of both the commodity and 
sources of supply. 

Statutory Authority G.S. 143-52; 143-53; 143-53.1. 

.0402 REVIEW BY BOARD OF AWARD 

AND SECRETARY OF ADMINISTRATION 

The customary review and award procedure is not a 
requirement in acting on proposed contracts less than the 
dollar amount prescribed by the Secretary proposals which 
do not follow the formal advertising bidding procedure (1 
NCAC 5B .0300) . However, any controversial matters or 
questions of policy which might be involved in informal 
purchases are these proposed contracts may be reviewed 
with the Board of Award and Secretary of Administration . 

Statutory Authority G.S. 143-52; 143-53. 

.0403 DIVISION OF REQUIREMENTS 

It is not permissible to divide requirements in order to 
keep them under the fiv e thousand dollar ($5,000) figur e 
established benchmark or general delegation amounts, and 
thereby avoid the required sealed, — advertised — bidding 
competitive bid/proposal procedure or the required quotation 
procedure, whichever applies. In the case of similar and 
related items and groups of items, the dollar limits apply to 
the total cost rather than the cost of any single item. 

Statutory Authority G.S. 143-52; 143-53. 



Statutory Authority G.S. 143-49; 143-52; 143-53. 

SECTION .0400 - INFORMAL PROPOSALS 
(QUOTATION) PROCEDURE 



.0404 DELEGATIONS 

Purcha ses may b e mad e dir e ctly by all state agencies 
which ar e authoriz e d to is s ue th o ir own purchas e orders and 
by community' collcgos, technical institutes and public school 
administrative units, up to the dollar limit authorized by tho 



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PROPOSED RULES 



Division for each agoncy, undor the quotation procoduro in 
Rule .0101 of thio Sootion. Suoh purohao e o oan b e mad e by 
gonorol delegation. 

A general delegation ifl an authorization made by the 
Divioion of Purchase and Contract to an agency for the 
purohae e — of all e quipm e nt, — matorialo — and suppli e s not 
cov e r e d by otate oontraoto and oooting l e ss than th e dollar 
limit authorized by the Division for the agency. — In the oaao 
of similar and related itomo and groups of items, the 
maximum dollar limit authorized by th e Divioion applioo to 
the total ooot rather than to the coot of any singl e it e m. 
Requiromenta may not, however, bo divided to bring them 
within this provision. 

Purohaooo by on agency of materials noooDoar>' for r e pairs 
or alterations, if to bo used or furnish e d by that ag e ncy, 
should bo made in the name manner as any other purchases. 

Statutory Authority G.S. 143-53. 

SECTION .0500 - REJECTION OF OFFERS 

.0501 BASIS FOR REJECTION 

In roquooting proposals soliciting offers , any and all offers 
received may be rejected in whole or in part. Basis for 
rejection shall include, but not be limited to, the offer 
prof>ooal being deemed unsatisfactory as to quantity, quality, 
delivery, price or service offered; the proposal offer not 
complying with conditions of the invitation procurement 
document or with the intent of the proposed contract; lack 
of competitiveness by reason of collusion or otherwise or 
knowledge that reasonably available competition was not 
received; error(s) in specifications or indication that revi- 
sion(s) would be to the state's advantage; cancellation of or 
changes in the intended project or other determination that 
the proposed requirement is no longer needed; limitation or 
lack of available funds; circumstances which prevent 
determination of the lowest responsible or most advanta- 
geous bid offer ; any determination that rejection would be 
to the best interest of the state. 

Statutory Authority G.S. ] 43-52; 143-53. 

.0502 REASONS FOR PUBLIC RECORD 

Action in rejecting aii offers in whole or in part is token 
as in a canvass of bids for award shall conform to proce- 
dures prescribed by the SPO and the reasons therefor made 
a matter of record. Suoh action may includ e a dotormiD ft- 
tion to negotiate the purchase or the contract in the open 
market to better advantage with purchase order to be placed 
or oontmot o e rtiFi e d to using ag e nci e s in th e usual maim e r. 

Statutory Authority G.S. 143-52; 143-53. 

.0503 NEGOTIATION 

If all offers are rejected, a determination may be made to 
negotiate the purchase, with the award of contract handled 
in accordance with rules prescribed herein. 



Statutory Authority G.S. 143-52; 143-53; 143-60. 
SECTION .0600 - PURCHASE OF USED ITEMS 

.0601 GENERAL PROCEDURES 

When it appears to the Stat e PurohaoLng Offio e r SPO that 
the acquisition of used equipment, materials or supplies is 
in the public interest, the bidding procedure competitive 
procedures shall be followed wherever feasible. 

Statutory Authority G. S. 143-53. 

.0602 ACQUISITION m BEST INTEREST 
OF STATE 

R e quests for bids Solicitation documents on used items 
may or may not include a request for prices on like new 
products, but in either case acquisition may be made on the 
basis of that which is considered most advantageous for the 
intended purpose purpo6 e 6(6) . 

Statutory Authority G.S. 143-53. 

SECTION .0700 - REMOVAL OF CERTAIN ITEMS 
FROM GENERAL CONSTRUCTION 

.0701 POLICY 

As may be practicable, r e quir e m e nta such as Venetian 
blinds, water coolers, laboratory furniture, food service 
equipment, etc., should certain items, as determined by the 
Secretary, may be removed from general construction 
contracts and purchased through the Division of Purchase 
and Contract. 

Statutory Authority G.S. 143-53. 

.0702 TURN KEY PROJECTS 

Turn key projects are governed by the rules of the 
Division of Stat e Construotion, 1 NCAC 30. 

Statutory Authority G.S. 143-341(3). 

SECTION .0800 - PRINTING 

.0801 GENERAL POLICY 

The Division of Purchase and Contract makes provisions 
for or contracts for the printing requirements of, stat e 
government all agencies, with the exception of cortununity 
colleges and local school administrative units , either through 
the use of applicable state facilities facilities, delegation, 
waiver, or by seeking competitive propooolo competition in 
the open market. 

Requests for quotations or bids Competition in the open 
market on printing requirements fall generally into several 
broad categories such as pamphl e ts — and publications, 
brochures, saddlestitched or perfect bound books, quick 
copy, forms, labels, engraving, binding and other miscella- 
neous work. 



1656 



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PROPOSED RULES 



Statutory Authority G.S. 143-49; 143-53. 

.0802 PROCEDURE 

Except for ooooaional omall joba, roquiaitiona for printing 
nooda arc initiatod by otato agoncioa and forwarded to tho 
Divioion of Purohooe and Contraot for handling. — Tbe 
Divioion maintainD lioto of proopootiv e biddoro aooording to 
tho capabilitioa and compotitivonoaa of firma to po ffefa 
certnin t)'pos of work. — Thoroforo, effort ia made to direct 
roquooto to thooo firmn able to reopond oomp e titiv e ly 
aooording to th e natur e of tho work b e ing call e d for. — In 
addition, roquoota fof bida on requirements coating five 
thouaand doUara ($5,000) or more ore publicly advortiaod. 

For work wh e re definite quantitioo ar e important, bid 
invitations d e aignat e th e aoo e ptnblo level of count to be 
delivered in terms of acceptable minimums and ovoragoa; 
ovor runo beyond thoao designated ore not paid for. — Whore 
work deUvored io below the aoo e ptablo quality' l e vel or time 
roquiremonto ar e not met, th e oupplier io oonoidorod in 
default and tho atate sooka appropriate romcdioa. 

Whore tho nature of the v ^ 'ork requirea aocurity procau 
tiono, the otate limito oonoid e rations of award to bidd e rs 
capabl e of meeting ouoh conditions. Further, th e stat e in ito 
diacrotion requirea p>erformanoo bonds on certain typoa of 
work or from bidders whoso capabilitioa may bo in question. 



coaoa bo hold to a doUvory date propwrtionatoly later becauao 
prior production oommitm e ntfl may limit his op e n production 
time during the subs e qu e nt p e riod. — This situation oan also 
be caused by delay in the rotum of proofa to the printer. 

Statutory Authority G.S. 143-49. 

.0805 SUBMISSION OF MANUSCRIPTS 

Manuflcriptfl ahould be submitted in an organized, logical 
fashion to facilitat e th e printing proc e dur e and aid in 
insuring prompt d e liv e ry of tho finish e d product. 

Whon tho copy ia all new, it ahould be typed on one aide 
only of 8 1/2 by 11 inch pafwr, double spaced, with the 
sam e numb e r of lin e s per page wherev e r applicable. — ?%e 
original copy should b e submitt e d for th e print e r to work 
from and a carbon copy retained by the uaing agency. — The 
pages ahould bo consecutively numbered to insure that none 
g e ts misplaced when separat e d for composing. 

Wh e n th e oopy is partly n e w and partly from a previous 
printing, it should also be prepared on one sido only of 
8 1/2 by 11 inch paper. — Tho printed pages ahould bo 
stapl e d or glu e d to sheets of pap e r and int e rsp e rs e d betv i 'oen 
th e pag e s of tj'p e d copy in prop e r s e qu e nc e . — A duplicat e 
manuscript should bo prepared and retained for tho agency's 
record. 



Statutory Authority G.S. 143-49. 

.0803 LEAD TIME 

Reasonabl e l e ad timo is important in soouring printing and 
binding work. 

Whoro an unusual market oxiata duo to auch factors as a 
s hortage of paper or tho like or whoro work involving 
unusual oompooition or production is r e quir e d, — long e r 
advanc e tim e s may be n e o e ssar>'. 

Tho requisition ahould indicate a deliver)' date which 
ollowa enough timo for internal procoaaing, public advortis 
ing, normal bidding and production tim e for th e print e r. 

When request e d d e liv e iy tim e is too short for normal 
procoaaing, tho requesting agency either should call and 
explain the situation before sending in tho requisition or 
attach a note to th e original copy of th e r e quisition e xplain 
ing the situation. — A ^ Tior e possibl e , sp e cial handling is given 
in auch cases. 

Statutory Authority G.S. 143-49. 



Statutory Authority G.S. 143-49. 

.0806 PRINTING SAMPLES 

Print e d form samples submitt e d with r e quisitions for 
printing which contain no corr e ctions and are not marked to 
indicate that thoy are to be reviaod are presumed to bo 
reprints and are bid accordingly. Since the cost for reprints 
is somewhat less, it is important that printing sampl e s b e so 
mark e d unl e ss chang e s ar e r e quir e d. 

Statutory Authority G.S. 143-49. 

.0807 AUTHOR'S ALTERATIONS 

Author's alterations (abbreviated A.A.b) moan corrections 
in proofs which are not caused by printer's error. — When an 
ag e ncy mak e s chang e s v ^ 'hich should have boon made in tho 
manuscript before submission to tho printer, th e charg e for 
A. A. 3 may bo quite high; therefore, it is imperative that 
agencies submit manuacripts in as nearly perfect form as 
possibl e . 



.0804 SUBMISSION OF MATERIAL AFTER 
PROMISED DATE 

In instances wh e r e th e manuscript is not compl e t e d and 
bids are to be obtain e d bas e d on a sampl e of an e xisting 
similar publication, the requisition must indicate tho date 
when tho new copy will bo available to tho printer as well 
as th e final d e liv e r)' dat e . If an ag e ncy submits oopy to th e 
printer aft e r th e date promised, th e print e r is not h e ld 
responsible for a resulting late deliver)' since his bid was 
based on a specific production f > oriod nor con he in such 



Statutory Authority G.S. 143-49. 

.0808 APPROVAL SIGNATURE 

UTi e n proofs ar e returned to th e print e r with th e approval 
signature, any errora not marked for correction will appear 
in tho finished product; and tho printer ia not held reaponsi 

Statutory Authority G. S. 143-49. 



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November 15, 1995 



1657 



PROPOSED RULES 



.0810 STATEMENT OF COST OF PUBLIC 
DOCUMENTS 

Ever)' ag e noy, wh e n publiohing a public dooum e nt that is 
not for the principal pufpooo of aolo to the public, ohall 
CQU30 a s tatement aa to tho number of oopio e printed, total 
dir e ct reproduction coot, and the coot p e r copy to b e plac e d 
by th e agency name. 

Statutory Authority G.S. 143-170.1. 

SECTION .0900 - INSPECTION AND TESTING 

.0901 RESPONSIBILITY 

U^on tho roquoot for bido roquiroo inopeotion, it ohall b e 
don e by a dooign ee of th e Divioion of Purohao e and Contract 
boforo accoptonco of payment. Tho vondof must notify' tho 
Diviflion of Purchase and Contmot upon delivery of in s tolla 
tion as written in tho roquoot for bido. In general, it is the 
responsibility of the receiving agency to inspect all materi- 
als, supplies, and equipment upon delivery to insure 
compliance with the contract requirements and specifica- 
tions. However, when the contract requires an inspection 
by the Division of Purchase and Contract, it shall be 
conducted by a designee of the Division. 

Statutory Authority G.S. 143-60. 

.0902 SELECTION 

The Division of Purchase and Contract has the responsi- 
bility of determining what items contracted through the 
Division are to be inspected before release of payment. The 
Division may periodically inspect any or all items to insure 
that specifications are met. 

The «sef agency must insure that items and services 
purchased comply with applicable codes, statutes, local 
ordinances, policies or undorv ^ 'ritoro' laboratorioa safety 
requirements. 

Statutory Authority G. S. 143-60. 

.0904 SAMPLES 

When samples are required in response to a solicitation 
document issued by the Division of Purchase and Contract. 
it is the responsibility of the Division to test, or have tested, 
those samples. Samples are not to be sent directly to 
laboratories outside the jurisdiction of the r e c e iving ag e noy 
Division of Purchase and Contract unless specifically 
authorized by the Division. 

Statutory Authority G.S. 143-60. 

.0905 SPECIFICATIONS 

Inspectors may not modify, amend or revise a contract 
specification or accept products with deviations from 
contract specifications, either verbally or in writing without 
authorization from the Division of Purchase and Contract 
purchaser/engineer involved . 



Statutory Authority G.S. 143-60. 

.0906 REPORT OF DISCREPANCY 

Where products delivered fail to meet the specifications or 
contract requirements, the discrepancy shall be reported to 
the Stat e Purohoouig Offic e r Division of Purehase and 
Contract for resolution. 

Statutory Authority G.S. 143-60. 

SECTION .1000 - GUARANTEES AND 
WARRANTIES 

.1001 ENFORCEMENT 

Using agencies are resjjonsible for enforcing the contrac- 
tual guarantee or warranty a pplying to the supplies, materi- 
als, and equipment purchased clausoo contained in their 
purohao e ord e ro and oontmct awardo . 

Statutory Authority G.S. 143-60. 

.1002 REPORT TO PURCHASING 

If any agency has difficulty in obtaining satisfactory 
performance, including service as provided for in a guaran- 
tee or warranty, the matter should be referred to the State 
Purohofling Offic e r Division of Purchase and Contract for 
his attention and appropriate action. 

Statutory Authority G.S. 143-60. 

.1003 RESPONSIBILITY OF USING AGENCY 

The using agency must notify the vendor promptly when 
latent or other defects are discovered. In the event the 
vendor fails to remedy the condition reported, the matter 
should be referred to the State Purohaoing Offic e r Division 
of Purchase and Contract . 

Statutory Authority G. S. 143-60. 

SECTION .1100 - TERM CONTRACTS 

.1101 USE 

Term oontmot contracts, known also as indefinite quantity 
or requirements contracts, are used generally to establish 
suppliers and prices of a given commodity, commodity or 
group of commodities or services for a period of time 
without guaranteed quantities being specified. Such con- 
tracts generally serve to consolidate seeds normal require- 
ments of various agencies into one agreement. While tb© 
majority many of the state's term contracts are effective for 
a period of one year, conditions sometimes call for issuance 
for a shorter or longer period. 

A term contract is a binding agreement between purchaser 
and seller to buy and sell certain commodities or services at 
certain prices and under stipulated terms and conditions. It 
is neither an "approved list" nor a list of approved or ceiling 
prices. Moreover, no department, institution, or agency. 



1658 



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PROPOSED RULES 



agency may purchase any supplies, tnatorialo or materials. 
equipment or services covered by a term contract from any 
other sources than thooo oortifiod by th e S e or e tar)' of 
Administration . 

A term contract is normally based upon sealed compotitivo 
bids competition with the bidd e r companies being advised as 
to whose business they are competing ho io bidding for and, 
if successful, whose business ho hoa they have earned. 



Statutory Authority 
115D-58.5. 



as. 143-52; 143-55; 115C-522; 



.1103 COPIES OF TERM CONTRACTS 

State ag e nci e s and inotitutiono and public oohool adminio 
trative unito ar e furnish e d th e neoeooary oopi e o of a t e rm 
contract in tho form of a cortification of tho contract for uso 
and guidance in preparing requisitions or in placing pur 
chase ord e rs. 

Statutory Authority G.S. 143-52; 143-55. 

.1104 AMENDMENTS TO CONTRACTS 

If it should b e come noooooar^' to am e nd, modify or oano e l 
portions or all of existing contracts, copies of addenda shall 
bo mailed to both tho contractors and all using agoncios and 
oohool units. 

Statutory Authority G.S. 143-52; 143-55. 

.1106 DISCOUNT SCHEDULES 

Und e r c e rtain spooial oiroumfltano e o, th e Division may 
issue a contract cortification which, although not a binding 
contract, ostabliaho s discount schodulos at which purchase of 
th e commodities so indicat e d io authoriz e d without furth e r 
approval from th e Division. — Onoo e stablish e d, such a 
oortifiod discount schodulo or other price basis may bo 
continued for on unspecified length of timo. 

Statutory Authority G.S. 143-52; 143-55; 143-58; 143-49. 

.1108 EXTENSION OF CONTRACT 
TERMINATION DATES 

When in ^ public interest, contractors may be requested 
to extend the scheduled termination dates of contracts. 

Statutory Authority G.S. 143-52; 143-49. 

SECTION .1200 - PARTIAL A>fD MULTIPLE 
AWARDS 

.1201 USE 

Partial, progressive or multiple awards may be made by 
reason of insufficient funds, legislative mandates, where it 
is advantageous to award separately by items or where more 
than one supplier is needed to provide the contemplated 
requirements as to quantity, quality, delivery, service(s) or 
geographical areas. 



Notwithstanding the necessity for awards to more than one 
supplier in the case of some indefinite quantity contracts, the 
policy shall be to limit such awards to the number of 
suppliers deemed necessary to reasonably satisfy the 
intended requirements. Extreme care is exercised to protect 
the character and principles of comp e titiv e bidding competi- 
tion , and dividing quantities among bidders companies on 
definite quantity requirements is not permitted unless and 
except as provided in the request for proposals procurement 
document . 

Statutory Authority G.S. 143-53(6). 

.1202 SELECTION FROM LISTS OF SUPPLIERS 

Wh e n mor e than on e suppli e r io list e d, agonoios and 
school units should dotormino which contract supplier can 
more nearly furni s h tho product or service to fill tho 
particular n e ed in qu e stion, pric e consid e r e d, and submit 
their requisition or plac e th e ir purchas e ord e r accordingly. 

Statutory Authority G.S. 143-53(6). 

SECTION .1300 - SMALL PURCHASES 

.1301 PROCEDURES 

Procedures for making small purchases must include 
sufficient controls to insure proper protection of funds, 
provide for adequate audit trail and insure that small 
purchase authorizations are not used to circumvent normal 
purchasing practices. Basically, small purchase procedures 
involv e th e us e of impr e st (p e tty cash) funds or blanltet 
purchase orders and may be utilized to procure supplies and 
services within the dollar limitations and other constraints 
prescribed by the SPO ag e ncy policy . They can be appro- 
priately used to obtain small quantities of items not available 
under existing contracts, contracts, to buy vor^' limited 
quantities whore the normal method would result in oxcos 
oiv e coots in r e lation to tho value of mat e rial, to buy sundry 
Qor . 'ioos or to pay fr e ight billo. 

In all small purchase procedures, agoncios are to employ 
approved accounting practices. 

Statutory Authority G.S. 143-53. 

.1302 DOLLAR LIMITATIONS 

Ag e nci e s ar e to TTie SPO shall prescribe dollar limitations 
which will be applicable to individual small purchase 
transactions. TTioso limitations should bo consistent with tho 
purposes for which small purchase procoduros have boon 
authorized and with th e accounting proc e dur e to bo utilized. 

Statutory Authority G.S. 143-53. 

SECTION .1400 - WAIVER OF COMPETITION 

.1401 POLICY 

Under certain conditions, and otherwise if deemed to be 



10:16A 



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November 15, 1995 



1659 



PROPOSED RULES 



in the public interest, tho State Purchaoing Officer — may- 
rooommond to the board of award that oompotitivo bidding 
competition may be waived. Conditions permitting waiver 
include but are not limited to cases where performance or 
price competition are not available; where a needed product 
or service is available from only one source of supply; 
where emergency action is indicated; where bido hav e 
competition has been solicited but no satisfactory bid(B) 
offers received; where standardization or compatibility is the 
overriding consideration; where a donation predicates the 
source of supply; where personal or certain professional 
services are required; where a particular medical product or 
service, or prosthetic appliance is needed; where a product 
or service is needed for the blind or severely disabled and 
there are overriding considerations for its use; where 
additional products or services are needed to complete an 
ongoing job or task; where products are bought for "over 
the counter" resale; where a particular product or service is 
desired for educational, training, experimental, developmen- 
tal or research work; where equipment is already installed, 
connected and in service, and it is determined advantageous 
to purchase it; where there is evidence of resale price 
maintenance or other control of prices, lawful or unlawful, 
or collusion on the part of bidders companies which thwarts 
normal bidding competitive procedures; where the amount 
of the purchase is too small to justify soliciting quotations 
competition or where a onrnll purchase is being made and a 
satisfactory price is available from a previous bid of 
quotation contract; where the requirement is for an autho- 
rized cooperative project with another governmental unit(s) 
or a charitable non-profit organization(s); where a used 
item(s) is available on short notice and subject to prior sale. 

Statutory Authority G. S. 143-53. 

.1402 DOCUMENTATION 

Although competitive bidding competition may be waived 
for proper cause, its use is required wherever practicable; 
and further, where waiver is contemplated, e xc e pt for small 
purchaflos, the reason(B) therefore must bo documented, and 
bo roviowcd as in a canvass of bids it must be documented 
and reported in accordance with procedures prescribed by 
the SPO. 

Statutory Authority G. S. 143-53. 

.1403 DATA PROCESSING HARDWARE AND 
SOFTWARE 

If competitive bidding is waived in tho acquisition of data 
proo e soing hardwar e and softv i 'ar e , a writt e n e xplanation is 
r e quir e d from th e uoing ag e ncy tog e th e r with writt e n 
comments and advice from the Director of tho Division of 
State Information Procesaing Sor . 'ioes and, where accounting 
functions are involv e d, th e Stat e Auditor. — Th e s e e xpr e e 
oiono are giv e n du e consid e ration by th e Stat e Purchasing 
Officer for any recommendation ho presents to tho Board of 
Award and Socrotar)' of Administration. 



Statutory Authority G. S. 143-53. 
SECTION .1500 - MISCELLANEOUS PROVISIONS 

.1501 CONFIDENTLVLITY 

To promote maximum competition and to protect the 
public bidding competitive procedure from being used to 
obtain information which would normally not be available 
otherwise, the Division of Purchase and Contract is autho- 
rized to maintain the confidentiality of certain types of 
information. Such information includes Dun and Bmdotreot 
reports, bidders' financial statements and, if roquostod by a 
bidder or prosp)ectivo bidder, similar personal or proprietory 
information; chemical formulations, manufacturing proc e ss e s 
and oth e r trad e s e cr e ts; op e oifio tost results trade secrets, as 
determined by North Carolina law, and like information as 
the State Purchasing Officer SPO may determine to insure 
the integrity of the public purchasing process. 

Trade secrets which the offeror does not wish disclosed 
shall be identified as follows: Each page shall be identified 
in boldface at the to p and bottom as "CONFIDENTIAL". 
Cost information shall not be deemed confidential. 

Statutory Authority G.S. 143-52; 143-53(9). 

.1502 BONDS 

Although bid bonds are not requir e d by tho Division, 
p oi ' f u i 'u ionco bonds may bo caUod for at the discretion of tho 
State Purchasing Officer. 

Statutory Authority G. S. 143-52. 

.1503 REMEDIES 

In tho event of d e fault or oth e r unsatisfaotor>' p e rformanc e 
on tho {Xirt of a contractor, th e Division shall txik e appropri 
ate action to protect and safoguord tho state's intorost. 

Statutory Authority G. S. 143-60. 

.1504 PAYMENT PLANS 

Purchase contracts may provide for payment over a period 
of time. Such instances, however, shall should be fully 
justified, kept to a minimum y minimum and carry written 
prior approval of the administrative head of the agency. 
agency and, as applicable, of the Budget Division of tho 
Departm e nt of Administration Administrative heads and 
governing board of agencies are responsible for seeing that 
statutory or other prohibitions are not violated. In entering 
into any such agroomonta, the The intended plan of payment 
is to be included in the procurement document mad e known 
to prospective bidders . 

Statutory Authority G.S. 143-53. 

.1505 FUNDS FROM DIFFERENT SOURCES 

Unless approved otherwise, all public funds irrespective of 
source, whether special, federal, local, gifts, bequests, 



1660 



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November 15, 1995 10:16A 



PROPOSED RULES 



agency may purchase any supplies, mntorialo or materials. 
equipment or services covered by a term contract from any 
other sources than thooo certifi e d by th e S e cr e tary of 
Administration . 

A term contract is normally based upwn sealed competitive 
bids competition with the bidd e r companies being advised as 
to whose business they are competing ho io bidding for and, 
if successful, whose business ho has they have earned. 



Statutory Authority G. S. 
115D-58.5. 



143-52; 143-55; 115C-522; 



.1103 COPIES OF TERM CONTRACTS 

State agonoioo and inDtitutiono and public school adminio 
trative unito ar e fumioh e d th e n e o e ooar)' copi e s of a t e rm 
contract in the form of a certification of tho contract for use 
and guidance in preparing requisitions or in placing pur 
ohaoe ord e rs. 

Statutory Authority G.S. 143-52; 143-55. 

.1104 AMENDMENTS TO CONTRACTS 

If it ohould b e come nooeooaiy to am e nd, modify' or canc e l 
portions or all of existing oontractg, oopiog of addenda s hall 
bo mailod to both tho contmctorg and all using agencies and 
school units. 

Statutory Authority G.S. 143-52; 143-55. 

.1106 DISCOUNT SCHEDULES 

Under certain opooial oiroumotanooo, the Division may 
issue a contract certification which, although not a binding 
oontmct, establishes discount schedules at which purchase of 
the commoditi e s so indicat e d io authoriz e d without furth e r 
approval from the Division. — Ono e e stablish e d, such a 
cortifiod discount schedule or other price basis may bo 
continued for an unapocifiod length of time. 

Statutory Authority G.S. 143-52; 143-55; 143-58; 143-49. 

.1108 EXTENSION OF CONTRACT 
TERMINATION DATES 

When in die public interest, contractors may be requested 
to extend the scheduled termination dates of contracts. 

Statutory Authority G.S. 143-52; 143-49. 

SECTION .1200 - PARTIAL AND MULTIPLE 
AWARDS 

.1201 USE 

Partial, progressive or multiple awards may be made by 
reason of insufficient funds, legislative mandates, where it 
is advantageous to award separately by items or where more 
than one supplier is needed to provide the contemplated 
requirements as to quantity, quality, delivery, service(s) or 
geographical areas. 



Notwithstanding the necessity for awards to more than one 
suppUer in the case of some indefinite quantity contracts, the 
policy shall be to limit such awards to the number of 
suppliers deemed necessary to reasonably satisfy the 
intended requirements. Extreme care is exercised to protect 
the character and principles of comp e titiv e bidding competi- 
tion , and dividing quantities among bidders companies on 
definite quantity requirements is not permitted unless and 
except as provided in the request for propo s als procurement 
document . 

Statutory Authority G.S. 143-53(6). 

.1202 SELECTION FROM LISTS OF SUPPLIERS 

Wh e n mor e than on e suppli e r is list e d, agonoioo and 
school units should dotormino which contract oupplior can 
more nearly furnish tho product or service to fill tho 
particular nood in qu e stion, pric e consid e r e d, and submit 
their requisition or plac e th e ir purchas e ord e r accordingly. 

Statutory Authority G.S. 143-53(6). 

SECTION .1300 - SMALL PURCHASES 

.1301 PROCEDURES 

Procedures for making small purchases must Include 
sufficient controls to insure proper protection of funds, 
provide for adequate audit trail and insure that small 
purchase authorizations are not used to circumvent normal 
purchasing practices. Basically, small purchase procedures 
involv e tho use of imprest (p e tty cash) funds or blonltet 
purchase orders and may be utilized to procure supplies and 
services within the dollar limitations and other constraints 
prescribed by the SPQ ag e ncy policy . They can be appro- 
priately used to obtain small quantities of items not available 
under existing contracts, contracts, to buy very limited 
quantities whore tho normal method would result in oxcos 
oiv e coots in r e lation to th e valu e of material, to buy sundr)' 
se rvic e s or to pay fr e ight bills. 

In all small purchaoe procedures, agencies are to employ 
approved accounting practices. 

Statutory Authority G. S. 143-53. 

.1302 DOLLAR LIMITATIONS 

Ag e noi e o ar e to The SPQ shall prescribe dollar limitations 
which will be applicable to individual small purchase 
transactions. Those limitations should bo consistent with tho 
purposes for which small purchase procoduros have boon 
authorized and with th e accounting proc e dur e to bo utiliz e d. 

Statutory Authority G. S. 143-53. 

SECTION .1400 - WAIVER OF COMPETITION 

.1401 POLICY 

Under certain conditions, and otherwise if deemed to be 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1659 



PROPOSED RULES 



in the public interest, the State Purchaaing Officer — me^ 
rooommond to the board of award that oompotitive bidding 
competition may be waived. Conditions permitting waiver 
include but are not limited to cases where performance or 
price competition are not available; where a needed product 
or service is available from only one source of supply; 
where emergency action is indicated; where bido hav e 
competition has been solicited but no satisfactory bid(8) 
offers received; where standardization or compatibility is the 
overriding consideration; where a donation predicates the 
source of supply; where personal or certain professional 
services are required; where a particular medical product or 
service, or prosthetic appliance is needed; where a product 
or service is needed for the blind or severely disabled and 
there are overriding considerations for its use; where 
additional products or services are needed to complete an 
ongoing job or task; where products are bought for "over 
the counter" resale; where a particular product or service is 
desired for educational, training, experimental, developmen- 
tal or research work; where equipment is already installed, 
connected and in service, and it is determined advantageous 
to purchase it; where there is evidence of resale price 
maintenance or other control of prices, lawful or unlawful, 
or collusion on the part of bidders companies which thwarts 
normal bidding competitive procedures; where the amount 
of the purchase is too small to justify soliciting quotation s 
competition or where a small purchase is being made and a 
satisfactory price is available from a previous bid or 
quotation contract; where the requirement is for an autho- 
rized coojserative project with another governmental unit(s) 
or a charitable non-profit organization(s); where a used 
item(s) is available on short notice and subject to prior sale. 

Statutory Authority G.S. 143-53. 

.1402 DOCUMENTATION 

Although competitive bidding competition may be waived 
for proper cause, its use is required wherever practicable; 
and further, where waiver is contemplated, e xc e pt for small 
purchases, the poa9on(3) therefore must bo documented, and 
bo reviewed as in a canvass of bids it must be documented 
and reported in accordance with procedures prescribed by 
the SPO. 

Statutory Authority G. S. 143-53. 

.1403 DATA PROCESSING HARDWARE AND 
SOFTWARE 

If competitive bidding is waived in the acquiaition of data 
proo e ooing hardwar e and ooft^varo, a writt e n e xplanation is 
r e quired from th e using ag e ncy — together with writt e n 
commonta and advice from the Director of the Division of 
State Information Processing Services and, whoro accounting 
functions are involv e d, th e State Auditor. — Those oxproo 
siono ar e given du e consideration by th e State Purchasing 
Officer for any recommondation be presents to the Board of 
Award and Secretary' of Administration. 



Statutory Authority G.S. 143-53. 
SECTION .1500 - MISCELLANEOUS PROVISIONS 

.1501 CONFIDENTIALITY 

To promote maximum competition and to protect the 
public bidding competitive procedure from being used to 
obtain information which would normally not be available 
otherwise, the Division of Purchase and Contract is autho- 
rized to maintain the confidentiality of certain types of 
information. Such information includes Dun and Bradstr ee t 
roporta, bidders' financial statements and, if requested by a 
biddof or prospective bidder, similar poraonal or proprietary' 
information; ohomioal formulations, manufaoturing prooesooo 
and other trad e s e crets; 6p> e oifio t e st r e sults trade secrets, m 
determined by North Carolina law, and like information as 
the State Purchaaing Officer SPO may determine to insure 
the integrity of the public purchasing process. 

Trade secrets which the offeror does not wish disclosed 
shall be identified as follows: Each page shall be identified 
in boldface at the to p and bottom as "CONFIDENTIAL". 
Cost information shall not be deemed confidential. 

Statutory Authority G.S. 143-52; 143-53(9). 

.1502 BONDS 

Although bid bonds ar e not r e quir e d by th e Division, 
performance bonds may be collod for at the discretion of the 
State Purchaaing Officer. 

Statutory Authority G.S. 143-52. 

.1503 REMEDIES 

In the e v e nt of d e fault or other unsatisfactory porformanoo 
on th e part of a contractor, th e Division shall tak e appropri 
ate action to protect and safeguard the state's interest. 

Statutory Authority G. S. 143-60. 

.1504 PAYMENT PLANS 

Purchase contracts may provide for payment over a period 
of time. Such instances, however, shall should be fully 
justified, kept to a minimum, minimum and carry written 
prior approval of the administrative head of the agency. 
agency and, as applicable, of the Budget Division of the 
Department of Administration Administrative heads and 
governing board of agencies are responsible for seeing that 
statutory or other prohibitions are not violated. In entering 
into any such agroomonta, the The intended plan of payment 
is to be included in die procurement document mad e known 
to prosp e ctiv e bidd e rs . 

Statutory Authority G.S. 143-53. 

.1505 FUNDS FROM DIFFERENT SOURCES 

Unless approved otherwise, all public fiinds irrespective of 
source, whether special, federal, local, gifts, bequests. 



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PROPOSED RULES 



receipts, fees, etc., or state appropriated, used for the 
purohoo e purchase, rental, lease, and lease-purchases of 
equipment, materials, supplies and services are to be 
handled under the provisions of Article 3 of Chapter 143 of 
the General Statutes and in accordance with procedures 
established pursuant thereto by the Division of Purchase and 
Contract. (Community Colleges and local educational 
administrative units are not required to use the Division of 
Purchase and Contract on rentals, leases and services.) 

Statutory Authority as. 143-53; 143-60(5). 

.1506 CONDITIONAL GRANTS: ETC: IN PUBLIC 
PURCHASING 

Where a grant, donation or special discount is predicated 
upon making a purchase from the grantor, the proposed 
transaction shall be is fully documented and shall is-te have 
prior approval of the S e or e tar>' of Administratio ft SPO . 
When a donation from private sources is predicated upon 
making the purchase or lease from a specific source, the 
purchase or lease may be made without prior approval of 
the SPO or Secretary. 

Statutory Authority G. S. 143-53. 

.1507 CHANGE IN CORPORATE STRUCTURE 

In cases where contractors ouppli e ro are involved in 
corporate consolidations, acquisitions or mergers, the 
Division of Purchase and Contract is authorized to negotiate 
satisfactory agreements for the transfer of contractual 
obligations and the continuance of supply contracts within 
the framework of the new corporate structures but with the 
understanding that the state's contracts are not instruments 
for sale and shall not be assigned . 

Statutory Authority G. S. 143-53. 

.1508 PURCHASES FOR ACROSS THE COUNTER 
RESALE 

Purchases of items for "across the counter" resale ordi 
norily are not handled through the Division of Purchase and 
Contract. However, all purchases of items for use by state 
agencies, and aohool administrativ e unita even if channeled 
through bookstores or other internal supply sources, includ- 
ing stockrooms and warehouses, are to be In accordance 
with regular purohos e proo e duroo rules adopted by the 
Secretary . 

Statutory Authority G.S. 143-53; 143-60(5). 

.1509 PURCHASING FROM OR THROUGH 
AGENCY EMPLOYEES 

Every reasonable effort is made to avoid making purchases 
from or through employees of state gov e rnm e nt or any of its 
agenoioo or of public school adminiotrativ e units. — Aay any 
agency. Prior written approval from the Secretary is 
required in any instances which may develop of doing 



business with such personnel oro reported to tho Socrotory 
of Adminiatration for action ao doom e d appropriate . 

Statutory Authority G.S. 143-53; 143-60(5). 

.1510 USE OF STATE PURCHASING POWER FOR 
PRIVATE GAE^ 

The purchasing power of the state is not to be used for 
private advantage or gain. F*urchases under contracts made 
by the state, except those in accordance with G.S. 143-58. 1 
are not to be allowed for personal use out of private funds 
nor are agencies or institutions to place orders for articles 
for ownership by employees or other individuals. 

Statutory Authority G.S. 143-53; 143-58.1. 

.1511 ANTITRUST VIOLATIONS 

In instances of identical bidding offers or where there are 
otherwise indications of ooUuoiv e bidding collusion , awards 
may be made in a manner intended to discourage or prevent 
its continuance as deemed to represent the state's best 
interests. Instances of suspected antitrust violation are 
reported to appropriate law enforcement authorities. 

In submitting bids offers to the Division, each bidder 
company must certify under penalty of perjury that his bid 
their offer has set been arrived at competitively and without 
ooUusiv e ly collusion and that h e has they have not violated 
any federal or North Carolina antitrust laws. 

Statutory Authority G.S. 143-53; 143-54. 

.1512 AVAILABILITY OF SERVICES TO CERTAIN 
NON-STATE AGENCIES 

The Division of Purchase and Contract makes purchasing 
services available to charitabl e nonprofit hospitals, local 
nonprofit community' sheltorod workshops, fwlitical subdivi 
sions, voluntoor firo dopartmonts and roscuo squads certain 
non-state agencies as defined by G.S. 143-49 and 143-49.1 . 
Suoh sorvio e o are limited to the expenditur e of public funds, 
and are rondorod under rules and regulations adopted by tho 
Secretary of Administration. Sorvicos to voluntoor firo 
d e partm e nts and r e scu e squads oono e m only gasolin e , oil 
and tir e s. Departm e nt of Administration rul e s provid e that 
tho 3or\'ico3 bo mado available in a gradual, orderly and 
effective manner. Necessarily, this is affected by budgetary 
allowances for personnel, time and related costs. 

The Division inquires periodically among non-state 
agencies hospitals and political subdivisions of tho state to 
determine the types of items available from state term 
contracts for which they would want the Division to contract 
for them. Based on this information, the Division develops 
an implementing schedule of items together with the times 
for handling them and the methods of purchasing or con- 
tracting. The Division has final decision as to items 
included on the schedule. 

Any hospital or subdivision may elect individually to 
participate in tho purchase of any particular itoms or groups 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1661 



PROPOSED RULES 



of itoma providod in the schodulo in tho following nmnnor ^- 
for ind e finite quantity' oontmoto. by roquooting the Divioion 
prior to tho invitation for bido to inoludo ito r e quir e m e nte in 
tho next invitation; and, whon doFinito quantity' pufchoiwo 
arc handled, by foquisitioning in tho oamo tnannof oa state 
agonoioo. 

Where non-state agencies covered by this provision a 
hospital or subdiviaion elects to participate in a contract, 
contract — or purchase, its resulting contractual duties, 
obligations and responsibilities are the same as those 
required for stat e agencies and institutions . 
Hospitals and subdivisions Non-state agencies covered by 
this provision shall make payments to suppliers in a timely 
manner and in accordance with the terms of the contracts. 
oontraot and, for data and statistical purpos e s, shall furnish 
tho Divioion a copy of oach order or release issued under 
such contracts. 

As may be practicable in terms of personnel, time and 
costs, the Division may offer its services. In addition to 
purchasing and contracting, to hospitals and subdivisions 
non-state agencies with respect to preparation of specifica- 
tions, contracts for services, inspection and testing of 
products, expediting deliveries and advising as to market 
conditions. 

Statutory Authority G.S. 143-49(6); 143.49.1. 

.1513 COOPERATIVE PURCHASING 

Where an agency of tho state or school administrative -tmk 
is a participant in an authorized cooperative project with 
another governmental activity or with a charitable non-profit 
organization, corporation, goods and services necessary to 
the project shall be acquired according to the state's custom- 
ary procedures; provided, however, that if the interest of the 
state would be better served by one of the following 
acquisition methods, making acquisition on behalf of such 
governmental activity' or corporation, or by authorizing 
acquisition on the stat e 's behalf und e r th e provisions of 
Article 8 of Chapter HS of th e G e n e ral Statut e s, the Stat e 
Purchasing Officer SPO may do so with prior approval of 
the Secrotar)' of Administration. Secretary: 

(1) by making acquisition on behalf of such govern- 
ment activity or charitable non-profit organization; 
or 

(2) by authorizing acquisition on the State's behalf 
under the provisions of G.S. 143, Article 8^ or 

(3) by authorizing acquisition on the State's behalf 
under the provisions of another State or another 
governmental entity, provided due consideration is 
given by the Secretary to the differences in pur- 
chasing rules, regulations and procedures of the 
contracting entity. 

Statutory Authority G.S. 143-49; 143-53; 143-60. 

.1516 ADVERTISING 

No contract shall be used for any advertising by the 



contractor without prior written approval of the Division of 
Purchase and Contract. 

Statutory Authority G.S. 143-53; 143-60. 

.1517 GOODS REQUIRING IMMEDIATE 
ACCEPTANCE 

In the purchase of items which are subject to rapid price 
fluctuation or immediate acceptance, the SPO may award 
contracts as deemed advisable provided that each such action 
is made a matter of record and reported promptly to the 
Board of Award and Secretary. 

Statutory Authority G.S. 143-52; 143-49. 

.1518 BOARD OF AWARD 

When the dollar value of a contract for the purchase, 
lease, or lease/purchase of equipment, materials, and 
supplies exceeds the amount prescribed by the Secretary, the 
Board of Award (Board) shall canvass the bids (review the 
recommended action) and submit their recommendation 
(award, cancellation, approval, negotiation, etc.) to the 
Secretary. The Secretary either concurs with the recom- 
mendation of the Board by awarding contracts or approving 
other recommended action, or takes other appropriate action 
as deemed necessary. The Advisory Budget Commission 
designates two or more members to serve as a Board. The 
Secretary further designates the following persons who can 
serve in this capacity in the absence of member(s) of the 
Commission: 

Assistant Superintendent for Financial Services. 

Department of Public Instruction; 

State Treasurer; 

Secretary of State; 

Representative from Attorney General's Office; 

All Council of State members with the exception of the 
Governor. 

These alternate members shall not further delegate this 
responsibility. The Board normally meets weekly. 

Recommendations for the award of contracts are reviewed 
only by the Division of Purchase and Contract, the Board, 
and the Secretary. Records are kept of each meeting and 
made public by the SPO unless the SPO determines a 
record needs to be confidential due to the nature of the 
purchase (Ex: Law enforcement surveillance equipment). 
The Secretary may elect to proceed with the award of 
contracts without the recommendation of the Board in cases 
of emergencies or in die event that a Board is not available. 
In such cases, contracts awarded without Board review will 
be reported to a subsequent Board as a matter of record. 

Exemptions: Purchases not normally presented to the 
Board or to the Secretary for approval; exemption by 
statute, by Special Delegation, or where one agency is 
buying from another agency or through State or Federal 
Surplus. 

Statutory Authority G.S. 143-53; 143-318.18(10). 



1662 



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November 15, 1995 10:16A 



PROPOSED RULES 



receipts, fees, etc., or state appropriated, used for the 
purohoo e purchase, rental, lease, and lease-purchases of 
equipment, materials, supplies and services are to be 
handled under the provisions of Article 3 of Chapter 143 of 
the General Statutes and in accordance with procedures 
established pursuant thereto by the Division of Purchase and 
Contract. (Community Colleges and local educational 
administrative units are not required to use the Division of 
Purchase and Contract on rentals, leases and services.) 

Statutory Authority G.S. 143-53; 143-60(5). 

.1506 CONDITIONAL GRANTS: ETC: IN PUBLIC 
PURCHASING 

Where a grant, donation or special discount is predicated 
upon making a purchase from the grantor, the proposed 
transaction shall be is fiilly documented and shall k-te have 
prior approval of the Soorotnr)' of Administration SPO . 
When a donation from private sources is predicated upon 
making the purchase or lease from a specific source, the 
purchase or lease may be made without prior approval of 
the SPO or Secretary. 

Statutory Authority G. S. 143-53. 

.1507 CHANGE IN CORPORATE STRUCTURE 

In cases where contractors suppli e rs are involved in 
corporate consolidations, acquisitions or mergers, the 
Division of Purchase and Contract is authorized to negotiate 
satisfactory agreements for the transfer of contractual 
obligations and the continuance of supply contracts within 
the framework of the new corporate structures but with the 
understanding that the state's contracts are not instruments 
for sale and shall not be assigned . 

Statutory Authority G.S. 143-53. 

.1508 PURCHASES FOR ACROSS THE COUNTER 
RESALE 

Purchases of items for "across the counter" resale ordi 
nnrily are not handled through the Division of Purchase and 
Contract. However, all purchases of items for use by stat e 
agencies, and oohool adminiatrative unito even if channeled 
through bookstores or other internal supply sources, includ- 
ing stockrooms and warehouses, are to be in accordance 
with r e gular purohao e proo e dur e o rules adopted by the 
Secretary . 

Statutory Authority G.S. 143-53; 143-60(5). 

.1509 PURCHASING FROM OR THROUGH 
AGENCY EMPLOYEES 

Every reasonable effort is made to avoid making purchases 
from or through employees of state govorrunont or any of its 
agonoioa or of public oohool adminiotrativo unito. — Any any 
agency. Prior written approval from the Secretary is 
required in any instances which may develop of doing 



business with such personnel ore reported to tho Socrotor)' 
of Adminiotration for action oo doom e d appropriate . 

Statutory Authority G.S. 143-53; 143-60(5). 

.1510 USE OF STATE PURCHASING POWER FOR 
PRIVATE GAIN 

The purchasing power of the state is not to be used for 
private advantage or gain. Purchases under contracts made 
by the state, except those in accordance with G.S. 143-58. 1 
are not to be allowed for personal use out of private funds 
nor are agencies or institutions to place orders for articles 
for ownership by employees or other individuals. 

Statutory Authority G.S. 143-53; 143-58.1. 

.1511 ANTITRUST VIOLATIONS 

In instances of identical bidding offers or where there are 
otherwise indications of oolluoiv e bidding collusion , awards 
may be made in a manner intended to discourage or prevent 
its continuance as deemed to represent the state's best 
interests. Instances of suspected antitrust violation are 
reported to appropriate law enforcement authorities. 

In submitting bids offers to the Division, each bidder 
company must certify under penalty of perjury that his bid 
their offer has set been arrived at competitively and without 
oollusiv e ly collusion and that h e has they have not violated 
any federal or North Carolina antitrust laws. 

Statutory Authority G.S. 143-53; 143-54. 

.1512 AVAILABILITY OF SERVICES TO CERTAIN 
NON-STATE AGENCIES 

The Division of Purchase and Contract makes purchasing 
services available to charitabl e nonprofit hoopitnlo, local 
nonprofit community' sheltered workshops, political subdivi 
oiona, volunteer fire dopartmonta and roocuo squads certain 
non-state agencies as defined by G.S. 143-49 and 143-49.1 . 
Suoh e e r . 'io e o ar e limit e d to th e e xp e nditur e of public fundo. 
and ore rendered under rules and regulationa adopted by tho 
Socrotar>' of Administration. Sop i 'iooa to volunteer fire 
d e partm e nts and r e oou e oquado oono e m only gasolin e , oil 
and tiroa. Department of Adminiotration ruloa provid e that 
the services be made available in a gradual, orderly and 
effective manner. Necessarily, this is affected by budgetary 
allowances for personnel, time and related costs. 

The Division inquires periodically among non-state 
agencies hospitals and political aubdiviaiona of the state to 
determine the types of items available from state term 
contracts for which they would want the Division to contract 
for them. Based on this information, the Division develops 
an implementing schedule of items together with the times 
for handling them and the methods of purchasing or con- 
tracting. The Division has final decision as to items 
included on the schedule. 

Any hospital or subdivision may elect individually to 
participate in tho purchase of any particular items or groups 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1661 



PROPOSED RULES 



of items provided in the schodulo in tho following mannor » 
for ind e finite quantity' oontmoto, by roquooting the Divioion 
prior to th e invitation for bido to includ e ita roquir e m e nto in 
tho next invitation; and, whon doFinito quantit)' purchofloa 
aro handled, by requisitioning in tho oamo mannof as state 
agonoi e o. 

Where non-state agencies covered by this provision a 
hospital or aubdivision elects to participate in a contract. 
contract — or purchaoo, its resulting contractual duties, 
obligations and responsibilities are the same as those 
required for stat e agencies and inotitutiono . 
Hospitals and subdivisions Non-state agencies covered by 
this provision shall make payments to suppliers in a timely 
manner and in accordance with the terms of the contracts. 
oontraot and, for data and statiotioal purpoooo, ohall fumioh 
tho Division a copy of each order or rolcaso issued under 
such contracts. 

As may be practicable in terms of personnel, time and 
costs, the Division may offer its services, in addition to 
purchasing and contracting, to hospitals and subdivisions 
non-state agencies with respect to preparation of specifica- 
tions, contracts for services, inspection and testing of 
products, expediting deliveries and advising as to market 
conditions. 

Statutory Authority G.S. ] 43-49(6); 143.49.1. 

.1513 COOPERATIVE PURCHASING 

Where an agency of the state or school administrative unit 
is a participant in an authorized cooperative project with 
another governmental activity or with a charitable non-profit 
organization, corporation, goods and services necessary to 
the project shall be acquired according to the state's custom- 
ary procedures; provided, however, that if the interest of the 
state would be better served by one of the following 
acquisition methods, making acquisition on behalf of such 
governmental activity' or corporation, or by authorizing 
acquisition on th e stat e 's b e half under th e provioiono of 
i\rtiol e 8 of Chapter 113 of th e G e n e ral Statut e s, the Stat e 
Purchasing Officer SPO may do so with prior approval of 
the Soerotar)' of Administration. Secretary: 

(1) by making acquisition on behalf of such govern- 
ment activity or charitable non-profit organization; 
or 

(2) by authorizing acquisition on the State's behalf 
under the provisions of G.S. 143, Article 8^ or 

(3") by authorizing acquisition on the State's behalf 
under the provisions of another State or another 
governmental entity, provided due consideration is 
given by the Secretary to the differences in pur- 
chasing rules, regulations and procedures of the 
contracting entity. 

Statutory Authority G.S. 143-49; 143-53; 143-60. 

.1516 ADVERTISING 

No contract shall be used for any advertising by the 



contractor without prior written a pproval of the Division of 
Purchase and Contract. 

Statutory Authority G.S. 143-53; 143-60. 

.1517 GOODS REQUIRING IMMEDIATE 
ACCEPTANCE 

In the purchase of items which are subject to rapid price 
fluctuation or immediate acceptance, the SPO may award 
contracts as deemed advisable provided that each such action 
is made a matter of record and reported promptly to the 
Board of Award and Secretary. 

Statutory Authority G.S. 143-52; 143-49. 

.1518 BOARD OF AWARD 

When the dollar value of a contract for the purchase, 
lease, or lease/purchase of equipment, materials, and 
supplies exceeds the amount prescribed by fte Secretary, the 
Board of Award (Board) shall canvass the bids (review the 
recommended action) and submit their recommendation 
(award, cancellation, approval . negotiation, etc.) to the 
Secretary. The Secretary either concurs with the recom- 
mendation of the Board by awarding contracts or approving 
other recommended action, or takes other appropriate action 
as deemed necessary. The Advisory Budget Commission 
designates two or more members to serve as a Board. The 
Secretary fiirther designates the following persons who can 
serve in this capacity in the absence of member(s) of the 
Commission: 

Assistant Superintendent for Financial Services. 

Department of Public Instruction; 

State Treasurer; 

Secretary of State; 

Representative from Attorney General's Office; 

All Council of State members with the exception of the 
Governor. 

These alternate members shall not further delegate this 
responsibility. The Board normally meets weekly. 

Recommendations for the award of contracts are reviewed 
only by the Division of Purchase and Contract, the Board, 
and the Secretary. Records are kept of each meeting and 
made public by the SPO unless the SPO determines a 
record needs to be confidential due to the nature of the 
purchase (Ex: Law enforcement surveillance equipment). 
The Secretary may elect to proceed with the award of 
contracts without the recommendation of the Board in cases 
of emergencies or in Ae event that a Board is not available. 
In such cases, contracts awarded without Board review will 
be reported to a subsequent Board as a matter of record. 

Exemptions: Purchases not normally presented to the 
Board or to the Secretary for approval; exemption by 
statute, by Special Delegation, or where one agency is 
buying from another agency or through State or Federal 
Surplus. 

Statutory Authority G.S. 143-53; 143-318.18(10). 



1662 



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November 15, 1995 10:16A 



PROPOSED RULES 



.1519 PROTEST PROCEDURES 

A party wanting to protest a contract award handled by the 
Division of Purchase and Contract must submit a written 
request for a protest meeting to the SPO which must be 
received in die Division of Purchase and Contract within 30 
consecutive calendar davs from the date of the protested 
contract award. This letter must contain specific sound 
reasons and any supporting documentation for why the party 
is protesting the award or the protest will be promptly 
rejected. If the SPO can render a decision based on the 
facts without a meeting, a written response with a decision 
will be rendered within 10 consecutive calendar days of the 
receipt of the protest letter. If not, the SPO will schedule 
a meeting with the protesting party to hear their complaint. 
This meeting will be held within 30 consecutive calendar 
days after receipt of the written protest. TTie SPO will 
respond to the protesting party in writing with a decision 
within 30 consecutive calendar days from the date of the 
protest meeting. All decisions of the SPO shall be the final 
administrative review. 

Statutory Authority G.S. 150B-2; 150B-22; 150B-23; 143-53. 

.1520 DEFAULT PROCEEDINGS; DEBARAIENT 

The SPO. who may consult with the Board of Award, may 
find a contractor in default of contract for failing to perform 
in accordance with the contract requirements, terms and 
conditions. If a contractor is found in default of contract, 
the SPO can take action, immediate if necessary, to pur- 
chase the needed products or services on the open market 
and charge any additional cost for the product or service and 
expense for doing so to the defaulting contractor. (If there 
was a performance bond required of the company as part of 
the contract, it can be redeemed with the cash proceeds 
going to the State.") In addition, that company may be 
removed from all mailing lists and debarred from doing 
business with any agency, for a period of time at the 
discretion of the SPO. This does not limit any other 
remedies that may be available to the State or agency. 

Statutory Authority G.S. 143-49; 143-52; 143-60. 

.1521 FAITHTUL PERFORMANCE 

A bond, or other suitable means, may be required of the 
contractor at their expense and in the discretion of the State 
Purchasing Officer. 

Statutory Authority G.S. 143-52. 

SECTION .1600 - EXEMPTIONS: EMERGENCIES 
AND DELEGATIONS 

.1601 EXEMPTIONS 

Unless directed otherwise by the Secretary. S e or e tar)' of 
Adminiotration it is not mandatory that publish e d booko, 
monufloripta and lilco material and porishablo articles such as 
firoah moctfl for the items and services listed in this Rule to 



be purchased through the Division of Purchase and Con- 
tract. Where such purchases are made directly by using 
agencies, how e v e r, comp e titiv e bido aro competition is 
required wherever posoiblo possible, unless a small purchase 
is being made. The Socrotnry — of Adminiatration haa 
dir e ct e d that oontraota for tv ^ 'o ouoh t)'poo of foodo, bakery 
products and Aaxry produota, b e awarded through th e 
Division of Purchase and Contract. The printing of Supremo 
Court reports ia oxomptod — from handling through the 
Division of Purohaoe and Contract. — Th e purohoo e of liquor 
ia not handl e d through th e Division of Purohaoo and Con 
tract. 

purchase of liquor: 

printing of Supreme Court reports is exempted: 
perishable articles such as fresh meats: 
published books, manuscripts, subscriptions to 
printed material, packaged copyrighted software 
products, and like material: 

services provided by individuals by direct employ- 
ment contracts with the state: 
public utiUty services ("gas, water and electricity); 
telephone, telegraph and cable services furnished 
by those companies: 

services provided which are subject to published 
tariff rates as established by the Interstate Com- 
merce Commission: 

services which are merely incidental to the pur- 
chase of supplies, materials or equipment such as 
installation services: 
contracts for construction of and structural 



m 

(2} 

m 

(4i 



£5} 

(6} 

m 

£8} 



m 



(10) 



im 



changes to public buildings: 
personal services provided 



by a professional 



individual on a temporary or occasional basis, 
including (by way of illustration, not limitation) 
those provided by a doctor, dentist, attorney, 
architect, professional engineer, scientist or 
performer of the fine arts and similar professions: 
the exemption applies only i_f the individual is 
using his/her professional skills to perform a 
professional task: a personal service may also be 
a consulting service: 

(12) services provided directly by an agency of the 
state, federal or local government, or their em- 
ployees when performing the service as a part of 
their normal governmental function: 

(13) In addition to products and services exempted by 
Statute, the SPO may exempt certain products and 
services provided that the SPO makes findings: 

(a) that competition will not enhance the price that 
the State would receive for the product or ser- 
vice: and 

(b) that competition will not enhance the quality of 
the product or service that the State would 
receive. 

The Secretary has directed that contracts for two such types 
of foods, bakery products and dairy products, be awarded 
through the Division of Purchase and Contract, if over their 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1663 



PROPOSED RULES 



normal delegated dollar amount. 

Statutory Authority G.S. 143-53; 143-56; 143-62; 7A-6(B). 

.1602 EMERGENCIES 

The Stat e Purohnoing Qffioor SPO may make or authorize 
purchases in the open market in cases of emergency or 
pressing need. For this purpose, a pressing need is one 
arising firom unforeseen causes including but not limited to 
delay by contractors, delay in transportation, breakdown in 
machinery, or unanticipated volume of work; while emer- 
gencies are defined generally as situations which endanger 
lives, property or the continuation of a vital program and 
which can be rectified only by immediate on-the-spot 
purchases or rental of equipment, supplies, materialsj. 
printing or services. 

When circumstances require such action, verbal approval 
is to be obtained from the Division of Purchase and Con- 
tract if time permits. Subsequently, whether or not such 
prior approval was possible, the circumstances must be 
documented and reported in accordance with procedures 
prescribed by the SPO in writing to th e Diviaion, to b e 
r e port e d ao in ooooo — of oonvoooing bido and awarding 
oontraota and made a matter of record. 

Statutory Authority G.S. 143-57; 143-60. 

.1603 DELEGATIONS 

The State Purchasing Officor SPO may authorize by 
peneral delegation (see Rule .0401 of this Subchapter) or 
special delegation ("see below) any stat e agency, oommunity 
collogo, technical institute or local board of education to 
purchase directly such supplies, materials, equipment or 
services as he may designate, provided that: 

(1) Where available, items or their functional equiva- 
lents are obtained in accordance with established 
state contracts; 

(2) It e ms which ore purohao e d by ooh e dul e ar e oonool 
idat e d and forv ^ 'ardod to th e Divioion aooording to 
the OBtablishod dates and schodulos (monthly, 
quarterly, etc.); 

(1) (3) Agency quotation forms, general conditions of 

purchase and purchase order forms are subject to 

approval by the Division; 
(^ No indofinito quantity oontraota or price agree 

m e nte are entered into without ep e oifio prior 

approval by th e Division; 

(3) (#) Copies of all agency purchase orders or like 
information are forwarded as requested to the 
Division, giving the basis for the purchase (state 
contract, local quotation, etc.); 

(4) (6) In all cases, applicable legal requirements and 
good purchasing practices are followed, including 
obtaining reasonable and adequate competition 
where availabl e available, unless a small purchase 
is being made, with quotation made a matter of 
record, record; 



(5) Delegations may be subject to certain dollar 
limitations, guidelines and conditions as deter- 
mined by the SPO; 

(6) Public advertisement is not required unless made 
a condition of the delegation. 

In ouoh oaoeo, public adv e rtio e ment io not required unleoo 
mad e a oondition of th e authorization. — Es'or)' ouoh authori 
zation is in writing, made a matter of record and oubject to 
approval of the Socrotar>^ of Adminiotration . — Such deloga 
tion oannot b e oontrar>' to the intent of any exioting oontraot 
for the oame or oimilar goodo or o e n i 'ioeo. — Furth e r, while 
not limited oo to expenditur e , guch delegation ia confined to 
items and quantities which, by their nature or oiroumatanoo 
ouoh p e riohableneoo, trannportntion oooto, looal oonditiono or 
local availability', would reoult in handling by th e Divioion 
of Purohaso and Contract sors'lng no pmotical purpose. The 
SPO may authorize, by special delegation, any agency to 
purchase certain items and quantities, or services without 
limitation as to expenditure. Such delegation is normally 
confined, but not limited to, items and quantities, or 
services which by their nature or circumstance, such as 
perishableness. transportation costs, local conditions or local 
availability, would result in handling by the Division of 
Purchase and Contract serving no practical purpose. Every 
such delegation shall be in writing and made a matter of 
record. 

The SPO Divioion of Purohaoe and Contraot, — in — its 
di s cretion, may require that proposals offers received under 
such delegations be sent to it the Division for determination 
of the successful bidder company . 

Approval of purchases by public school administrative 
units as provided under General Statute 115C-522 is based 
upon purchases being made in accordance with the provi- 
sions of Article 3 of Chapter 143. 

The Division of Purchase and Contract periodically 
reviews its delegations of purchase to ascertain the availabil- 
ity of these supplies, materials, equipment or services and 
their continued suitability for delegation. 

Statutory Authority G. S. 143-53. 

SECTION .1700 - PURCHASES FROM NORTH 
CAROLINA DEPARTMENT OF CORRECTION 

.1701 AUTHORIZATION 

TTi e division of purohaoe and oontraot authorizeo otate 
ag e nci e s — es4t — institutions to Agencies shall purchase 
products from the North Carolina Department of Correction 
prison ontorprisos aooording to availability, suitability, 
quality and prio e as provided by statute. 

Statutory Authority G.S. 148-70; 143-53; 143-59. 

.1702 NO COMPETITIVE BIDDING 

The Division's procedures do not place the purchase of 
prison products under competitive bidding competition 
against private industry. 



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PROPOSED RULES 



.1519 PROTEST PROCEDURES 

A party wanting to protest a contract award handled by the 
Division of Purchase and Contract must submit a written 
request for a protest meeting to the SPO which must be 
received in &e Division of Purchase and Contract within 30 
consecutive calendar days from the date of the protested 
contract award. This letter must contain specific sound 
reasons and any supporting documentation for why the party 
is protesting the award or the protest will be promptly 
rejected. If the SPO can render a decision based on the 
facts without a meeting, a written response with a decision 
will be rendered within 10 consecutive calendar days of the 
receipt of the protest letter. If not, the SPO will schedule 
a meeting with the protesting party to hear their complaint. 
This meeting will be held within 30 consecutive calendar 
days after receipt of the written protest. The SPO will 
respond to the protesting party in writing with a decision 
within 30 consecutive calendar days from the date of the 
protest meeting. All decisions of the SPO shall be the final 
administrative review. 

Statutory Authority G.S. 150B-2; 150B-22; 150B-23; 143-53. 

.1520 DEFAULT PROCEEDEVGS; DEBARMENT 

The SPO. who may consult with the Board of Award, may 
find a contractor in default of contract for failing to perform 
in accordance with the contract requirements, terms and 
conditions. If a contractor is found in default of contract, 
the SPO can take action, immediate if necessary, to pur- 
chase the needed products or services on the open market 
and charge any additional cost for the product or service and 
expense for doing so to the defaulting contractor. (If there 
was a performance bond required of the company as part of 
the contract, it can be redeemed with the cash proceeds 
going to the State.) In addition, that company may be 
removed from all mailing lists and debarred from doing 
business with any agency, for a period of time at the 
discretion of the SPO. This does not limit any other 
remedies that may be available to the State or agency. 

Statutory Authority G.S. 143-49; 143-52; 143-60. 

.1521 FAITHFUL PERFORMANCE 

A bond, or other suitable means, may be required of the 
contractor at their expense and in the discretion of the State 
Purchasing Officer. 

Statutory Authority G. S. 143-52. 

SECTION .1600 - EXEMPTIONS: EMERGENCIES 
AND DELEGATIONS 

.1601 EXEMPTIONS 

Unless directed otherwise by the Secretary. S & orotar)' of 
Adminiotration it is not mandatory that publish e d books, 
monusoripta and lilco material and jx t rishablo articlo3 such 09 
frooh mcat3 for the items and services listed in this Rule to 



be purchased through the Division of Purchase and Con- 
tract. Where such purchases are made directly by using 
agencies, how e v e r, oomp e titiv e bido ore competition is 
required wherever posoiblo possible, unless a small purchase 
is being made . The Socrotary of Administration 4ias 
dir e ct e d that oontraoto for tsvo ouoh t^'poo of foodo, bakory 
produota and dairy products, — b e awarded — through th e 
Division of Purchaao and Contmct. Tho printing of Supromo 
Court reports is oxomptod — from handling through tho 
Division of Purohoo e and Contract. — Th e purohao e of liquor 
is not handl e d through th e Division of Purohaoo and Con 
tract. 

purchase of liquor; 

printing of Supreme Court reports is exempted: 
perishable articles such as fresh meats: 
published books, manuscripts, subscriptions to 
printed material, packaged copyrighted software 
products, and like material: 
services provided by individuals by direct employ- 
ment contracts with the state: 



m 

£2} 
£3} 
£41 



£51 



public utility services (gas, water and electricity): 
telephone, telegraph and cable services furnished 
by those companies: 

services provided which are subject to published 
tariff rates as established by the Interstate Com- 
merce Commission: 

services which are merely incidental to the pur- 
chase of supplies, materials or equipment such as 
installation services: 

contracts for construction of and structural 
changes to public buildings: 
personal services provided by a professional 
individual on a temporary or occasional basis, 
including (by way of illustration, not limitation) 



£61 

£21 

£81 



£91 



(10) 



£111 



those provided by a doctor, dentist, attorney, 
architect, professional engineer, scientist or 
performer of the fine arts and similar professions: 
the exemption applies only if the individual is 
using his/her professional skills to perform a 
professional task: a personal service may also be 
a consulting service: 

(12) services provided directly by an agency of the 
state, federal or local government, or their em- 
ployees when performing the service as a part of 
their normal governmental function: 

(13) In addition to products and services exempted by 
Statute, the SPO may exempt certain products and 
services provided that the SPO makes findings: 

(a) that competition will not enhance the price that 
the State would receive for the product or ser- 
vice: and 

(b) that competition will not enhance the quality of 
the product or service that the State would 
receive. 

The Secretary has directed that contracts for two such types 
of foods, bakery products and dairy products, be awarded 
through the Division of Purchase and Contract, if over their 



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1663 



PROPOSED RULES 



normal delegated dollar amount. 

Statutory Authority G.S. 143-53; 143-56; 143-62; 7A-6(B). 

.1602 EMERGENCIES 

The State Purohooing Offic e r SPO may make or authorize 
purchases in the open market in cases of emergency or 
pressing need. For this purpose, a pressing need is one 
arising from unforeseen causes including but not limited to 
delay by contractors, delay in transportation, breakdown in 
machinery, or unanticipated volume of work; while emer- 
gencies are defined generally as situations which endanger 
lives, property or the continuation of a vital program and 
which can be rectified only by immediate on-the-spot 
purchases or rental of equipment, supplies, materialSj^ 
printing or services. 

When circumstances require such action, verbal approval 
is to be obtained from the Division of Purchase and Con- 
tract if time permits. Subsequently, whether or not such 
prior approval was possible, the circumstances must be 
documented and reported in accordance with procedures 
prescribed by the SPO in writing to th e Divioion, to b e 
report e d ao in ooo e o of oonvoooing bido and awarding 
contract9 and made a matter of record. 

Statutory Authority G.S. 143-57; 143-60. 

.1603 DELEGATIONS 

The State Purchasing Offioor SPO may authorize b^ 
general delegation (see Rule .0401 of this Subchapter") or 
special delegation (see below) any state agency, oommunity 
col logo, tochniool instituto or local board of education to 
purchase directly such supplies, materials, equipment or 
services as he may designate, provided that: 
(1) Where available, items or their functional equiva- 
lents are obtained in accordance with established 
state contracts; 

f3) It e ms which are purohao e d by sob e dulo are oonool 

idat e d and for i >'arded to th e Divioion aooording to 
tho ostablishod datoa and schodulos (monthly, 
quarterly, otc); 
(2} (3) Agency quotation forms, general conditions of 
purchase and purchase order forms are subject to 
approval by the Division; 
{4) No indofmito quantity' contracts or prico agroo 
m e nts ar e e nt e r e d into without opooifio prior 
approval by the Divioion; 

(3) (#) Copies of all agency purchase orders or like 
information are forwarded as requested to the 
Division, giving the basis for the purchase (state 
contract, local quotation, etc.); 

(4) ^ In all cases, applicable legal requirements and 
good purchasing practices are followed, including 
obtaining reasonable and adequate competition 
where availabl e available, unless a small purchase 
is being made, with quotation made a matter of 
record, record; 



(5) Delegations may be subject to certain dollar 
limitations, guidelines and conditions as deter- 
mined by the SPO; 

(6) Public advertisement is not required unless made 
a condition of the delegation. 

In such ooo e o, public adv e rtio e m e nt io not roquirod unlooo 
mad e a condition of th e authorization. — Ev e r)' ouch authori 
zation is in writing, mado a matter of record and oubjoct to 
approval of tho Socrotar)' of Administration . — Such dologa 
tion cannot b e oontrar^' to th e intent of any e xioting contract 
for th e oamo or similar goodo or Der . 'iooo. — Furth e r, while 
not limited as to oxpondituro, 3uch delegation io confined to 
items and quantities which, by their nature or circumstanco 
such p e riohabl e nooo, tranopwrtation oooto, local oonditiono or 
local availability', would r e oult in handling by tho Divioion 
of Purohaoo and Contract serving no practical purpose. The 
SPO may authorize, by special delegation, any agency to 
purchase certain items and quantities, or services without 
limitation as to expenditure. Such delegation is normally 
confined, but not limited to, items and quantities, or 
services which by their nature or circumstance, such as 
perishableness. transportation costs, local conditions or local 
availability, would result in handling by the Division of 
Purchase and Contract serving no practical purpose. Every 
such delegation shall be in writing and made a matter of 
record. 

The SPO Divioion of Purchaoo and Contract, — m — its 
discretion, may require that proposals offers received under 
such delegations be sent to it the Division for determination 
of the successful bidd e r company . 

Approval of purchases by public school administrative 
units as provided under General Statute 115C-522 is based 
upon purchases being made in accordance with the provi- 
sions of Article 3 of Chapter 143. 

The Division of Purchase and Contract periodically 
reviews its delegations of purchase to ascertain the availabil- 
ity of these supplies, materials, equipment or services and 
their continued suitability for delegation. 

Statutory Authority G. S. 143-53. 

SECTION .1700 - PURCHASES FROM NORTH 
CAROLINA DEPARTMENT OF CORRECTION 

.1701 AUTHORIZATION 

Tho division of purchas e and contract authorizes state 
ag e ncies — and inotitutiono to Agencies shall purchase 
products from the North Carolina Department of Correction 
prison ontorprisos according to availability', — suitability, 
qualit)' and pric e as provided by statute. 

Statutory Authority G.S. 148-70; 143-53; 143-59. 

.1702 NO COMPETITIVE BIDDENG 

The Division's procedures do not place the purchase of 
prison products under compotitive bidding competition 
against private industry. 



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PROPOSED RULES 



Statutory Authority G.S. 148-70. order will bo filed in the pro numbered foldor. The file 

includes the requisition, worksheet, mailing list, bid r e 
.1703 PURCHASES EV CONFLICT WFTH STATE opono e o offers , tabulation, related correspondence, and the 

CONTRACTS certification of award to the successful contractor bidder aa 

Producta of tho prison ontorpriaos aro not to bo purchosod well aa the purchase order, if ono \a iosuod by Purchase and 
in oonfliot with oimilar produoto whioh might b e includ e d on Contract . 

oDtablioh e d otnt e oontraoto. — If a r e quirement io oovorod by C e rtain information may b e olaooifiod ao confidential 

on ostabliahod contract, tho order must bo placed with tho 
supplier listed thereon. — In some in s tances, tho pri s on 
ontorpriooo io d e signat e d ao th e suppli e r on an ootabliohed 
otat e contract. 



Statutory Authority G.S. 148-70; 143-53(11). 

SECTION .1800 - INVENTORIES AND STORES 

.1803 SUPERVISION 

The Division of Purchase and Contract has responsibility 
for general supervision of storerooms and stores operated by 
state government . for supervision of inventories of tangible 
personal property belonging to state government and for 
reports by them of stocks on hand. 

Statutory Authority G.S. 143-49(4); 143-60. 

.1804 PERSONAL PROPERTY INVENTORY PLAN 

The Division of Purchase and Contract has the responsibil- 
ity of establishing policies for inventory management and 
control over storerooms and stores operated by State 
government. 

Statutory Authority G.S. 143-49(4); 143-60. 

SECTION .1900 - RECORDS OF THE DIVISION 
OF PURCHASE AND CONTRACT 

.1901 RECORD MAINTENANCE 

Except where rul e s of the Divioion of Purohaoo and 
Contract provid e State law provides to the contrary, after 
the award of a contract, the records of the Division are 
available as doscribod bolow public documents . Retention 
ooheduloo of both active and inactive fil e o ar e e stablish e d by 
tho archiv e s and records s e ction of tho D e partm e nt of 
Cultural Rosourcos. Purchase files should be maintained for 
a period of five years after the expiration date of the 
contract. 

Statutory Authority G.S. 143B-10(f). 

.1903 FILES 

Each requisition received by the Division of Purchase and 
Contract is assigned a unique, sequential control number and 
is placed in a pre-numbered folder. This number then 
becomes the file number for the requisition and subsequent 
documents bid or quot e numb e r and tho purchas e ord e r 
number, if ono i s issued by the Division. 

All documents related to tho bid or quote or purchase 



undorl NCAC 5B .0309 during tho period of evaluation, 
and under 1 NCAC 5B .1501 as tho State Purchasing 
Offioor may d e t e rmin e . — All other mat e rial After award of 
contract all material, except confidential information, in the 
file is open to interested {persons during normal office hours, 
may be hand copied, or copies will be fiimished following 
paym e nt of reasonable — oosts in accordance with fees 
established by the Department . 

Tho files are kept on file at the Division of Purchase and 
Contract for a period of ono year. Thereafter, they are 
available from tho Stat e Rooordo C e nt e r for a period of four 
y e ars. 

Statutory Authority G.S. 143B-10(f). 

.1906 APPLICATIONS FOR ADDITION TO 
MAILING LIST 

AppUcations of bidders included for inclusion on mailing 
lists are generally retained for five two years. 

Statutory Authority G.S. MSB- 10(f). 

.1907 TERM CONTRACTS 

A copy of each current and expired term contract may be 
seen upon request if still retained in the Division of Pur- 
chase and Contract or the State Records Center. 



Statutory Authority G.S. 143B-10(f). 

.1909 CANVASSING BID FILES 

A summary of actions taken in canvassing bids and 
awarding contracts may be seen io availabl e upon r e qu e st. 
request, if still retained in the Division of Purchase and 
Contract or the State Records Center. 

Statutory Authority G.S. 143B-10(f). 

SUBCHAPTER 5C - SURPLUS PROPERTY 

SECTION .0100 - GENERAL PROVISIONS 

Editor's Note: 1 NCAC 4G .0100 - .0500 have been 
transferred to 1 NCAC 5C .0100 - .0500, Effective 
November 1, 1995. 

.0101 RESPONSIBILITY 

The Department of Administration is responsible for 
administering the sale and disposal of surplus within state 
government. The administration of this program has been 
delegated by the Secretary of Administration to the SPQ 



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1665 



PROPOSED RULES 



AuxJlioT)' Sor i 'icofl Dirootor . 

Statutory Authority G.S. 143-49; 143-64.1 to 143-64.5. 

.0102 ORGANIZATION 

There are two agencies within the Division of Purchase 
and Contract Auxiliary' Sorviooo which administer the state's 
surplus property program. The state agency for state 
surplus property is responsible only for state government 
surplus property. The state agency for federal surplus 
property is responsible for disposal of federal surplus 
property. 

Statutory Authority G.S. 143-49; 143-64.1 to 143-64.5. 

SECTION .0200 - STATE SURPLUS PROPERTY 

.0201 TRANSFER OR SALEAVRTTTEN 
AUTHORIZATION 

No state department, institution or agency shall transfer or 
sell any personal property owned by the state without 
written authorization of the SPO Auxiliary' S e rvio e o Dir e o 
tor. 

Statutory Authority G.S. 143-49. 

.0202 NOTIFICATION OF SURPLUS 

State agencies notify the state surplus property agency of 
the Division of Purchase and Contract Auxiliary Servic e s of 
any personal property which is surplus to their needs by 
properly completing the equipment disposal form. In doing 
so, agencies may suggest a minimum dollar value which 
they desire to receive from any disposition made, but the 
suggestion shall not govern. 

Statutory Authority G.S. 143-49. 

.0203 TRADE-IN 

Under some conditions for some types of items it may be 
more advantageous to the state to seek to trade in used 
property against the purchase of a replacement. Before an 
agency makes any final decision to trade in an item, the 
SPO Auxiliar)' S e rviooo Dirootor should be contacted for 
guidance. 

Where a division requests bids for the purchase of a new 
item and it appears that a trade-in may be advantageous, the 
solicitation contains a provision requesting that a trade-in 
allowance be offered and prior approval by the SPO 
Director of Auxiliary Sor i 'ices is required. 

Statutory Authority G.S. 143-49. 

.0204 ORDER OF PRIORITY IN DISPOSITION 

In the disposition of state surplus property, the division 
customarily gives first priority to transfer to other agencies 
of the state. Second priority is given to transfer to political 
subdivisions and qualified non-profit organizations within the 



state. Property thus transferred must be for the use of the 
recipient agency, political subdivision or qualified non-profit 
organization with title being in such agency, unit or organi- 
zation. In making such transfers, the price shall be one 
mutually agreeable to the owning agency and the recipient 
and approved by the division as being a fair market price 
based where possible on previous sales of similar products 
in the open market. State surplus property transferred to 
any poUtical subdivision or non-profit organization must be 
retained by the unit or organization not less than 12 months 
before disposal, unless an earlier disposition is specifically 
authorized by the SPO Auxiliary' Sor i 'iceo Director . 

Statutory Authority G.S. 143-49. 

.0208 DISPOSAL BY OTHER MEANS 

Where state surplus property can be sold more advanta- 
geously by means other than sealed competitive bidding, 
either because of the nature of the property or the existence 
of unusual circumstances, the SPO Director of Auxiliary 
Sors'icoB may utilize whatever means are considered in the 
state's interest. 

Statutory Authority G.S. 143-49. 

.0211 EXECUTION OF BIDS 

The executor of a bid must sign his bid in pen or pencil in 
the space provided on the bid form and also print his name 
below the signature. Additionally, the executor must 
complete in the space provided, in pen, pencil, stamp, or 
gummed sticker, his full name and/or company name, social 
security no. or federal identification no., address, city, 
state, zip and phone number. 

Statutory Authority G. S. 143-49. 

.0217 FAILURE TO PAY 

If the purchaser fails to pay in full for the property within 
15 calendar days from the date of award, the property 
purchased will be promptly resold in such manner as the 
state may elect, and the defaulting purchaser charged with 
loss to the state, if any, together with all expense of the 
sale. If the purchaser does not remove the property pur- 
chased within 15 calendar days from the date of award, the 
Division of Purchase and Contract General SoP i 'icos Divi 
sioH reserves the right to retain the purchase price and resell 
the property a second time and retain all proceeds there- 
from. 

Statutory Authority G.S. 143-49. 

.0218 BOND 

The Division of Purchase and Contract General Sor . 'icoB 
Divioion reserves the right to require any bidder presently 
or previously in default to post a bond prior to bidding or 
prior to consideration of his bid. 



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PROPOSED RULES 



Statutory Authority G.S. 143-49. 

.0220 TIMBER SALES AND PINESTRAW SALES 

Timber and pinestraw owned by state agencies are 
customarily disposed of by the state surplus property agency 
on a sealed competitive bid basis. A request for bid forms 
will be sent to any interested party upon request. 

Timber and pinestraw are generally sold on a lump-sum 
basis with payment to be made in full at the time of execu- 
tion of a contract; and a high bidder may, in the discretion 
of the SPO Dirootor of Gonoml S e rsdo e o , be required to post 
bond prior to award. 

Statutory Authority G.S. 143-49. 

Mil PAYMENT 

All payments must be in the form of cashier's or certified 
check or postal money order. Payment in full for all 
property purchased must be made within 15 calendar -W 
working days from date of award, and all property pur- 
chased must be removed within 15 30 calendar days from 
date of award. No property may be removed by the 
purchaser prior to full payment of the purchase price. The 
terms bid opening date and date of award are considered to 
be one in the same. Working dayg are considorod to bo 
Monday thru Friday (holidayo e xclud e d) \ * 'hile oal e ndnrs 
days aro actual. 

Statutory Authority G.S. 143-49. 

SECTION .0300 - STATE SURPLUS PROPERTY 
FORMS 

.0303 NOTIFICATION: SALE OF SURPLUS 
PROPERTY 

Form PC-37 is used by State Surplus Property Auxiliary 
Sorvicoo to notify the agency and successful bidder of the 
sale and/or disposal of state surplus property. 



tion cost of five thousand dollars ($5.000) throo thoiioond 
dollars ($3,000) or more and any passenger motor vehicle. 

(b) Compliance reviews shall include a survey of donee 
compliance with any special handling conditions or use 
limitations imposed on items of property. 

(c) Compliance reviews shall also include a survey of 
donee compliance with the statutory requirement that items 
of donated property acquired by the donee be placed into 
use within one year of acquisition and used for one year 
thereafter. However, for items with a unit acquisition cost 
of five thousand dollars ($5.000) thr ee thouoond dollars 
($3 ,000) or more and passenger motor vehicles, regardless 
of acquisition cost, except vessels 50 feet or more in length 
and aircraft with a unit acquisition cost of five thousand 
dollars ($5.000) thr ee thousand dollaro ($3,000) or more, 
the following restrictions shall apply: 

(1) Property shall be used only for the purpose(s) 
for which acquired and for no other purpose(s). 

(2) There shall be a period of restriction which will 
expire after such property has been used for the 
purpose(s) for which acquired for a period of 18 
months, after being placed in use, on all passen- 
ger motor vehicles and other items of property 
with a unit acquisition cost of five thousand 
dollars ($5.000) three thousand dollars ($3.000) 
or more, except for such items as major equip- 
ment on which the state agency may designate a 
fiirther period of restriction of up to three years 
and so indicates on the distribution document. 

(3) In the event property is not so used or handled 
as required above, but federal restrictions have 
expired, title and right to the possession of such 
property shall, at the option of the state agency, 
revert to the State of North Carolina and the 
donee shall release such property to such person 
as the state agency shall direct. 

Statutory Authority G.S. 143-64.1 to 143-64.5. 



Statutory Authority G.S. 150B-11. 

.0304 NOTinCATION: AWARD OF SURPLUS 
PROPERTY 

Form PC-38 is used by State Surplus Property General 
Sor^'icos to notify the successful bidder and agency of the 
award of bid on state surplus property. Bidders need not be 
present at bid opening. 

Statutory Authority G.S. 150B-11. 

SECTION .0400 - FEDERAL SURPLUS PROPERTY 

.0403 COMPLIANCE AND UTILIZATION 

(a) The state agency shall effect utilization reviews for 
compliance by donees with the terms, conditions, reserva- 
tions and restrictions imposed by the Federal and state 
Government for any item of property having a unit acquisi- 



SECTION .0500 - FEDERAL SURPLUS PROPERTY 
FORMS 

.0508 AGREEMENT AND ACKNOWLEDGEMENT 
OF TRANSFER 

Form PC-FS-104 AA 123A is used in the transfer of 
property to eligible donees which has a gov e rnm e nt aoquioi 
tion cost of loss or mor e than thr e e thousand dollaro 
($3,000), oxcopt paggongor vohiclos . 

Statutory Authority G.S. 150B-11. 

.0509 AGREEMENT AND ACKNOWLEDGEMENT 
OF TRANSFER 

Form AA 133B is us e d in tho transfer of prop e rty to 
e ligibl e done e s which has a governm e nt acquisition oost of 
throo thousand dollars ($3,000) or more and all paggongor 
vohiclos. 



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1667 



PROPOSED RULES 



Statutory Authority G.S. 150B-11. 
SUBCHAPTER 5D - CONSULTANT CONTRACTS 
SECTION .0100 - CONSULTANTS 

.0101 APPLICABILITY 

The Rules in this Section and Section .0200 are applicable 
to all agencies of Stato gc'cmmont except local educational 
administrative units and Community Colleges. 

The Rules in this Section and Section .0200 do not apply 
to contracts for attorneys employed by the North Carolina 
Department of Justice or by other agencies of state govern- 
ment pursuant to the provisions of G.S. 147-17, to contracts 
for physicians or doctors providing direct medical care for 
the clientele of any state agency, to contracts entered into by 
the General Assembly or its special study commissions, to 
contracts entered into by the Institute of Government to 
provide or obtain consulting or advisory services, to 
contracts to provide services without compensation to the 
provider of the services or to his employing agency or to 
contracts entered into by a state agency pursuant to specific 
statutory authority which provides, in the opinion of the 
Governor or his designee, a specific alternative procedure 
for the selection and award of such contracts. 

Statutory Authority G.S. 143, Article 3C; 147-17. 

.0102 DEFrvmoN 

Sorviooo of a oonoultant of an advioor>' natur e Consultant 
services shall mean work or task(s) performed by State stat e 
employees or independent contractors possessing specialized 
knowledge, experience, expertise and professional qualifica- 
tions to investigate assigned problems or projects and to 
provide counsel, review, analysis or advice in formulating 
or implementing improvements in programs or services. 
This includes but is not limited to the organization, plan- 
ning, directing, control, evaluation and operation of a 
program, agency or department. S e rvic e oontraoto (as 
dofinod in Rule .0303 of this Subchapter) which aro not of 
a consultant or advisor)' nature (as dofinod in thio Rulo) 
shall b e subj e ct to th e proc e dur e s of Sootiono .0300, .0100, 
and .0500 of thio Subchapt e r.) 

State fiinds shall mean any and all money appropriated by 
the General Assembly of North Carolina or monies collected 
by or for the State stat e or any agency thereof pursuant to 
the authority granted in any of its laws. 

Statutory Authority G.S. 143, Article 3C; 143-1. 

SECTION .0200 - CONTRACTING PROCEDURE 
FOR CONSULTANTS 

.0201 GENERAL STATEMENT OF POLICY 

It is the pwlicy of the State stat e that stat e agencies shall 
acquire consultant services only after it is determined that 
the function for which the consultant is retained cannot be 



reasonably accomplished by employees of the agency 
seeking such services; that the use of a consultant is reason- 
ably necessary to the proper operation of the state agency; 
that the estimated cost is reasonable as compared with the 
likely benefits or results; that funds are available for such 
contract; that the contract is in the best interest of the state; 
and that all rules and regulations of the Division of Purchase 
and Contract have been or will be complied with, all as 
determined by the Governor or his designee and the Divi- 
sion of Purchase and Contract. In acquiring such services, 
competition shall be sought whenever practicable as deter- 
mined by the Division of Purchase and Contract. No 
agency of state govommont which is subject to the provi- 
sions of these rules may contract for services of a consultant 
nature except in accordance with the provisions of these 
rules. 

Statutory Authority G.S. 143, Article 3C. 

.0202 CONSULTING CONTRACTS WITH OTHER 
AGENCIES 

It is the policy of the State state that whenever possible 
consultant services shall be obtained from other stat e 
agencies when the services available from other stato 
agencies substantially meet the reasonable specifications of 
the requesting agency. 

Statutory Authority G.S. 143, Article 3C. 

.0203 REQUESTS FOR AUTHORITY TO 
CONTRACT WITH CONSULTANTS 

Before receiving authorization to seek consultant services, 
an agency shall submit to the Division of Purchase and 
Contract written justification for its request for consultant 
services. This written justification shall at a minimum 
explain what services the agency desires to secure, why the 
work to be performed by the consultant cannot be reason- 
ably accomplished by employees of the requesting agency, 
how the work to be performed relates to the proper func- 
tions of the agency, what benefits the agency expects to 
receive from the consultant's services, what the agency 
estimates to be the cost of the services sought, what 
potential sources of consultant services if any the agency has 
identified and such additional information as the Governor 
or the Division of Purchase and Contract may require. If 
the agency is requesting authority to contract for consulting 
services outside of State state government, it shaO also detail 
what potential sources of those services exist within State 
state government and explain why the desired services were 
not available from those sources. The written justification 
shall be accompanied by a letter of endorsement for the 
proposed contract(s) from the agency head or his designee. 

Statutory Authority G.S. 143-64.21; 143-64.22. 

.0204 REVIEW OF AGENCY REQUESTS 

The documents submitted by agencies requesting authority 



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PROPOSED RULES 



to retain consultants will be reviewed by the Division of 
Purchase and Contract. Upon completion of this review the 
requesting agency will be advised, subject to such conditions 
as may be prescribed by the Governor or his designee, to: 

(1) canvao canvass additional sources within state 
govenmient; or 

(2) solicit proposals from private contractors; or 

(3) execute a negotiated contract(s) without competi- 
tive proposals if the Division of Purchase and 
Contract and the Governor have determined that 
jjerformance or price competition is not available 
or that the requirement is for an authorized coop- 
erative project with another governmental unit(s) 
or a public or private nonprofit organization(s) or 
that the contract price is too small to justify 
soliciting competitive proposals; or 

(4) abandon the project for being outside the scope of 
the agency's responsibilities or for having insuffi- 
cient benefit to the State otnt e relative to the 
potential expenditure of funds. 



Division's analvsis. the Division shall forward a recommen- 
dation to the Governor. The Upon oompl e tion of this 
onalyoio the requesting agency shall be notified in writing by 
the Governor or his designee that all proposals have been 
rejected or that the agency head is authorized to execute a 
contract(s) with an approved service provider(s). 

Statutory Authority G.S. 143-64.20 to 64.23 

.0206 NEGOTIATED CONSULTANT CONTRACTS 

An agency which receives authorization to enter Into a 
negotiated contract(s) for consultant services without 
soliciting competitive proposals shall submit the proposed 
contract(s) to the Division of I*urchase and Contract for 
review and approval prior to execution. Upon completion 
of the Division's analvsis. the Division shall forward a 
recommendation to tiie Governor. Upon completion of this 
revi e w the The requesting agency shall be notified in 
writing by the Governor or feis designee that an approved 
contract(s) may be executed by the agency head. 



Statutory Authority G.S. 143-64.20 to 64.22. 

.0205 COMPETmVE PROPOSALS 

An agency which receives approval to solicit proposals for 
consultant services shall: 

(1) Prepare a request for proposals which must be 
approved by the Division of Purchase and Con- 
tract prior to dissemination among prospective 
service providers; 

(2) Circulate the request for propwsals to such sources 
of consultant services as may be identified by the 
Division of Purchase and Contract as well as all 
sources identified by the requesting agency; 

(3) Publicly ojjen all proposals received at a date and 
time set in the request for proposals; however, in 
a two-step evaluation process, only the technical 
proposal is opened on the opening date. The cost 
proposal is opened only if the technical proposal 
is determined by the State to be acceptable: 

(4) Upwn receipt of proposals the agency ohall submit 
a copy of each proposal received to the Division 
of Purchase and Contract; 

(5) Review all proposals received on the basis of 
evaluation criteria significantly related to the 
fimction to be performed and equally applied to all 
proposals received; r e o e iv & d. — Th e ag e ncy shall 
submit a memorandum to tho Diviaion of Purchase 
and Contract citing its criteria for aoloction and 
r e comm e nding a r e cipient of th e contract. 

(6) Submit a memorandum to the Division of Pur- 
chase and Contract citing criteria for selection and 
recommending contract award. 

The Division of Purchase and Contract shall evaluate all 
proposals received in accordance with the requirements of 
the request for proposals and shall consider the recommen- 
dations of the requesting agency. Upon completion of the 



Statutory Authority G.S. 143-64.20 to 64.23. 

.0208 FORMAT 

All contracts for consultant services shall be in writing, 
and in a format approved by the Division of F*urchase and 
Contract Contract, and include the General Terms desig- 
nated by the SPO . Contracts must be executed by the 
department head in the case of the executive departments of 
state government, by the chief executive officer of independ- 
ent boards and agencies, by the President of the University 
of North Carolina for contracts to which the university or 
any of its constituent institutions is to be a party, or by 
agents of above named officials who have been specifically 
designated by those officials and whose names and positions 
have been filed with the Division of Purchase and Contract 
and whose designation has been approved by the Division of 
Purchase and Contract and the Governor or his designee. 

Statutory Authority G. S. 143, Article 3C. 

.0209 RELATIONSHIP OF CONSULTANT TO 
STATE 

No contract for consultant services shall create an em- 
ployer-employee relationship between the State of North 
Carolina and an independ e nt oontraotor the consultant . 

Statutory Authority G.S. 143, Article 3C. 

.0210 CONSULTANT CONTRACTS CONTRARY TO 
THIS SECTION 

Any contract executed without the approval of the Division 
of Purchase and Contract and the Governor or his designee 
as provided in this Section shall be void, and no state funds 
shall be expended pursuant to any such contract. Any 
employee or official of the State of North Carolina who 
executes a contract without the approval of the Governor or 



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1669 



PROPOSED RULES 



feis designee shall be liable to repay any amount expended 
pursuant to such contract plus court costs. 

Statutory Authority G.S. 143-64.23; 143-1; 143-32. 

SECTION .0300 - SERVICE CONTRACTS 

.0301 APPLICABILITY 

Tho90 proccduroQ for sorvioo contraoto ohall bo applicable 
to all agonoi e o of the Stat e Govommont of North Carolina. 

Statutory Authority G.S. 143-49; 143-53. 

.0302 EXEMPTIONS 

Tho following t^'poo of oon i 'io e s ohall b e e x e mpt from 
adhoronco to those procoduroo: 

(4^ 9or . 'iGoa pro' . 'idod by individunla by direct employ 

mont oontraotD with the otat e ; 

(S^ public utilit)' oorv'io e o (gas, wat e r and e l e otrioit>'); 

(3^ telephone, telegraph and cable sorvicoB furnished 

by those companioo; 

(4) oon'io e o provid e d which are oubjoot to publish e d 

tariff ratoo ao ostablioh e d by th e Int e rstat e Com 
meroo Commission; 

(5) sorvicea which are merely incidental to tho pur 

ohaso of ouppli e e, mat e rials or equipm e nt ouoh oo 
installation aQr . 'io e s; 

^^ contracts — fef — construction — ef — and — structural 

changes to public buildings; 

(^3 p e rsonal — s e rvic e s — provid e d by a prof e ssional 

individual on a t e mporary' or oooasional basis, 
including (by way of illustration, not limitation) 
those provided by a doctor, dentist, attorney, 
archit e ct, — professional — engin ee r. — sci e ntist — ef 
performer of the fin e arts and similar prof e ssions; 
tho exemption applies only if the individual is 
using his/her professional — skills to perform — a 
professional task; a p e rsonal s e rvice may also b e 
a consulting B e r . 'io e , in which cas e it would b e 
subject to tho provisions of Sections .0100 and 
.0200 of tho Subchapter. 

(*) servic e s provided dir e ctly by an ag e ncy of th e 

Btato, federal or local governm e nt, or th e ir e m 
ployees when performing tho service as a part of 
their normal governmental function; 

(9) any oth e r s e rvic e d e signat e d to b e e x e mpt by th e 

State Purchasing Offic e r, or his authoriz e d ropro 
sontative. 

Statutory Authority G.S. 143-49; 143-53. 

.0303 DEFENmONS 

A ser i 'ice contract shall moon any agroomont in which an 
ind e p e nd e nt contractor performs s e rvic e s r e quiring sp e cial 
iged knowl e dg e , e xp e ri e nc e , e xp e rtis e or similar capabiliti e s 
for a s tate agency for compensation from state funds. — Th« 
services may include (by way of illustration, not limitation) 



servicos such as nmintononce of buildings or equipment, 
auditing, — film production, employee — training and food 
s e rvices, provided that th e s e rvic e is not primarily for 
review, analysis or advico in formulating or implementing 
improvements — in programs or services (in which case 
S e ctions .0100 and .0200 of this Subchapt e r, relating to 
oonoultants, shall b e applicabl e ). — Contracts for rental of 
equipment, materials or supplies shall bo deemed to bo 
sor^'ice contracts (but soo Regulation .0506 of this Subchap 

State fiinds shall m e an any and all mon e y appropriated by 
the General Assembly of North Carolina, or monies col 
loctod by or for the state or any agency thereof, pursuant to 
th e authority granted in any of its laws. 

Statutory Authority G.S. 143-49; 143-53. 

SECTION .0400 - CONTRACTING PROCEDURE 

.0401 GENERAL POLICY STATEMENT 

It shall bo general policy to acquire sor^'ico contracts by 
Booking comp e tition. Th e final decision making authority in 
r e gard to any phas e of procur e m e nt or performance of any 
sorvice contract is, and shall remain, tho State Purchasing 
Officer or the Secretary of Administration. Such authority 
may b e d e l e gat e d to such agenci e s or individuals as th e y 
may d e signat e but the right is r e s e P i ' e d to retract such 
authority at any time as either or both may doom it to bo in 
the best interest of the state. — Any contract enter e d into in 
th e nam e of th e stat e and paid for by stat e funds by a state 
ag e ncy, or any stat e e mploy ee , or any memb e r of a board 
or commission, which is contrary to an applicable rulo, 
regulation or theso procedures shall be void and of no 
e ff e ct. 

Statutory Authority G.S. 143-49; 143-53; 143-58. 

.0402 JUSTIFICATION 

B e for e an ag e ncy of th e stat e shall se e k to obtain a 
contractual ser i 'ico, — it shall make all of the following 
determinations: — that funds are available to covor tho total 
cost of th e s e p i 'io e ; that th e s e r^'io e is n ee d e d for th e prop e r 
op e ration of th e ag e ncy; that th e desir e d l e v e l of quality of 
tho service is adequate and reasonable for tho purpose 
intend e d; that all rules, regulations and procedures of the 
Purchas e and Contract Division have been or will b o 
compli e d with; that obtaining th e o e r\'ic e i s in th e b e st 
interest of tho state. 

After all determinations listed above aro made, they shall 
b e incorporat e d into a l e tt e r (or m e mo) of justification. — In 
addition to th e previous items, tho justification shall includ e 
on estimated cost for obtaining the sor i 'ice, as woll as a cost 
comparison botv r 'oon tho preferred method (or level) of 
s e P i 'io e and any alt e rnat e m e ans (or qualit)' l e v e ls) that ar e 
availabl e . — Such justification will b e in writing and will b e 
placed in a permanent file at tho agency. — Upon roquost, a 
copy of the justification shall be sent to tho State Purchasing 



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PROPOSED RULES 



Offioor or his roprooontativo. 

Statutory Authority G.S. 143-49; 143-53. 

.0403 TASK DESCRIPTION 

Whon juDtifioation for th e oop i io e hao boon oompl e ted, th e 
Qgouoy ohall pr e pare a compl e t e took doooription, outlining 
in detail tho son'icoB roquircxi. — Tho tnsk doooription ghall, 
03 a minimum, includo tho following: tho dato(3) of ooi^'ioo; 
detailed op e oifioationo or t>'p e and lev e l of work r e quir e d; 
what the otat e wUl fumioh; what th e oontraotor will fumioh; 
tho method and schodulo of paymenta to tho contractor; any 
other tomtij, couditiono, opocifioationfl or proceduroa bearing 
on th e conduct of th e work. 



Statutory Authority G.S. 143-49; 143-53. 
SECTION .0500 - COMPETmVE PROCEDURES 

.0501 GENERAL REQUIREMENTS 

After preparation of juntification and a ttxak doacription, 
tho agency ohall aolioit quotationo, or propooalo, from as 
many oouroeo ao pooaible. — In order to got a b e tt e r id e a of 
tho markot, tho agency ohould develop and maintain on 
"active bidder'g mailing hot" for each typo of service. — Such 
bidder'a Hot may b e compiled from previous knowl e dg e , 
trad e joumalo, Usto prepared by other otate ag e noi e o inolud 
ing tho Division of Purchase and Contract, — telephone 
diroctorieo, requests by vendors, etc. 

Each oontraotor contact e d ohall bo given a copy of th e took 
doooription (or it ohould be r e ad to him for phone quot e s), 
08 well OS any other information necessary — for him to 
prepare his quotation or proposal. — All contractors shall bo 
giv e n tho oom e information given to oil oth e r oontraotora, in 
order that no one ia giv e n pr e f e r e ntial tr e atm e nt, wh e th e r 
intentional or not. 

After all quotes or proposals are received, the agency shall 
tabulate th e r e oulta. — Each oontraotor'o off e r ohould b e 
car e fully analyz e d to asc e rtain compliance with tho task 
description, terms and conditions. — Before tho award of tho 
contract, the agency should make a determination through 
financial otat e m e nts, ref e r e noos, etc. , that tho reoommended 
contractor is capabl e of p e rforming th e work in a oatiofao 
tory manner. 

The agency ohould prepare the proposed contract, or 
agreement, incorporating th e task d e scription ther e in. — AU 
t e rms and conditions should b e ouch that th e otat e 'o b e st 
intorosto are protected. 

Statutory Authority G.S. 143-49; 143-53. 

.0502 SERVICES COSTING UP TO $500.00 

Services costing up to five hundred dollars ($500.00) may 
b e handl e d by tel e phon e quot e s, written requ e sts for quot e s 
or r e qu e ota for proposals. — If all rul e s, r e gulations, and 
procedures have boon complied with, the award of tho 
contract is delegated to tho requesting agency. Each 



contract in this range must have written approval of tho 
r e qu e sting agency's chi e f purchasing officer or his i ^or 
d e signat e d reproo e ntativ e . No furth e r approval is n e oeooar^'. 

Statutory Authority G.S. 143-49; 143-53. 

.0503 SERVICES COSTING OVER $500.00, BUT 
UNDER $5,000 

Sor i 'icos costing more than five hundred dollars ($500.00) 
and l e ss than five thousand dollars ($5,000) must bo sought 
by th e ag e ncy by issuing a writt e n formal request for 
proposals (RFP). Tho request for proposals should encom 
pass all requirements as outlined in 1 NCAC 5D .0501. 
Aft e r r e ceipt of propooalo and oomplionoo with all rules, 
r e gulations, and proc e dur e o, th e ag e ncy ohould molco ito 
rocommendation for av i 'ard. — This shall bo submitted to the 
agency's chief oxocutive — officer or his/her designated 
r e pr e s e ntativ e . Upon his/her approval, no furth e r r e view or 
approval is required. — Hov ^ 'evor, a copy of the e x e cut e d 
contract must bo submitted to tho Purchase and Contract 
Division. 

Statutory Authority G.S. 143-49; 143-53. 

.0504 SERVICES COSTING OVER $5,000 

Th e proc e dur e — for requ e st for proposals (RFP) and 
r e comm e ndation for th e ir award will be th e sam e ao the 
procodureo in 1 NCAC 5D .0503 with the following 
additions after approval by the executive officer or his/her 
r e pr e s e ntativ e : — the juotification m e mo, th e requoot for 
proposals, a copy of all proposals received, th e proposed 
contract, and the requesting agency's recommendation for 
award shall bo submitted to the Purchase and Contract 
Division for ito revi e w. After th e contractual o e rs'ice s e ction 
mak e s ito r e comm e ndation, all required supporting data will 
bo submitted to the State Purchasing Officer for final 
determination of tho sucoossful bidder and award of the 
contract . 

Statutory Authority G.S. 143-49; 143-53. 

.0505 SINGLE SOURCE SERVICES 

All agencies of the stat e ohall mak e e v e r)' e ffort to 
eliminate "solo — source — contracts" — v s 'honever — poooiblo. 
Competition is the best means available to aoouro that tho 
stat e r e c e iv e s th e b e ot s e rvic e at th e low e ot poooiblo coot. 
Wh e nev e r contracting with a sol e oourco io in e vitabl e , th e 
agency shall obtain approval from tho Division of Purchase 
and Contract to negotiate the contract with the vendor. 
Such oontraot(o) shall includ e a br e altdown by th e vendor 
it e mizing th e compon e nts of the propoo e d coot. 

Statutory Authority G.S. 143-49; 143-53. 

.0506 RENTAL AGREEMENTS 

Contmctfl or agrooments for rontal of equipment, material s 
or supplies shall be handled under the same rulos, rogula 



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1671 



PROPOSED RULES 



tiona and procoduros applicablo to commodity' purchases in 
1 NCAC 5B. — Suoh noodo ohould b e ooordinat e d with th e 
purohaoer in th e Purohaoo and Contraot Division who 
handloa that oommodit)'. 

Statutory Authority G.S. 143-49(1), (2); 143-53(5). 

.0507 GROUPING OF SERVICE PURCHASES 

Whonovor poaaiblo, on agency should group its require 
m e ntfl for oorviceo. particularly in the area of e quipm e nt and 
building maintenance. — Grouping chould b e don e wh e r e 
poBsible. whether the ser < 'ice is oingle l iourco or open to 
competition. 

Statutory Authority G.S. 143-49; 143-53. 

.0508 GENERAL CONTRACTING REQUIREMENTS 

fa^ All oontractD in oxo e oo of one hundred dollars 

($100.00) shall be in writing. 

fb) — Contractual 3or . 'ioe contracts (or agrooments). as 
defined in 1 NCAC 5D .0300 and .0 4 00. of any amount 
shall not b e e nt e red into for mor e than thr ee y e ars total, 
including oxtenoiono or r e n e wals, without speoifio prior 
approval by the Purchaoo and Contract Division. 

fe) — All contractual agrooments will bo governed by the 
laws of North Carolina unl e ss prior approval has been 
received from the Attorney General's Offic e . 

(d3 — All contracts shall be canoolablo upon a specified 
reasonable written notice at any time by the state for 
unsatisfactory' p e rformance or for th e oonv e ni e no e of th e 
stat e . 

(0) All contracts shall provid e for on option to require a 
performance bond. — Performance bond will be required 
wh e n doomed n e c e ssar)' by the stat e . 

(f) No public official is to b e n e fit from any contract with 
the state or any agency ther e of. 

(g) All contracts will stipulate that the contract is entered 
into in complianc e with s tate and f e deral antitrust laws. 

(h) A contractor shall furnish all work e r's comp e nsation, 
liabilit)' insurance and other insurance as may bo required to 
protect himself and the state from claims which may result 
from th e performanc e of th e contract. 

fi) — Paym e nt sch e dul e will b e s p e cified in contract. — Ne 
payment s hall normally be made for any p>ortion of the work 
unles s that portion of the work has been satisfactorily 
compl e t e d. 

(j^ — No contract (or any intoroot thoroLn) with th e stat e 
shall bo assignable. 

(iO — No contract will be used for any advertising by the 
contractor without prior approval of th e Purchas e and 
Contract Division. 

(1) No price adjustments will bo made unless the proce 
dure therefor i s set out in the original contract. 

Statutory Authority G.S. 143-49; 143-53. 

.0509 REQUEST FOR PROPOSALS 



The request for proposals (RFP) is to include, but not bo 
limit e d to, th e following: 
fi^ spooifioally dooorib e th e task and desir e d results of 

the service; 
(2) identify agency liaison personnel and any agency 

r e eouro e s that ar e availabl e to th e contractor; 
^ stat e when the contractor will begin the work, plus 

an estimate of the time nooessar)' to accomplish 

the work or the contract termination date; 
(4) sp e cify' applicabl e proc e dur e s oonooming billing, 

docum e ntation — r e quir e m e nts. — progr e os — r e ports, 

(5) designate that a minimum of two copies of the 

proposal be submitt e d; 

{%) inform th e pot e ntial contractors of th e crit e ria to 

bo used in evaluating the proposals: 

(*) the cost, including stato pwrsonnol and equipment 

utiliz e d; 

fb) the contractor's competenc e , citing dir e ct and 

indirect oxf>orienoo in the services to be ron 
dored; 

f?4 require pot e ntial contractor to includ e the follow 

ing information with proposals: 

(a) a description of tho firm's qualifications; 

(b) a list of agencies or businesses, v i 'ith names of 

contact persons, for whom similar work has 
boon done; 

(e) tho cost of tho service broken down by compo 

nonts; 

(d) th e propos e d mothodolog)' for aooomplishing the 

work (if not furnish e d in th e r e qu e st for propos 

Note: — Any questions of substantial import or having 
economic impact received from potential contractors should 
bo in writing and all r e sponding answers must also bo in 
writing. — All qu e stions and answers must b e provid e d all 

contractors — for preparing their proposal. A bidder's 

conforonco may bo provided in lieu of the above. 

Statutory Authority G.S. 143-49; 143-53. 

****************** 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the Department of Administration 
intends to amend rules cited as 1 NCAC 39 .0101 and 
.0201. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 2:00 pm on Novem- 
ber 30, 1995 at the Administration Building, Commission 
Room 5034, 116 West Jones Street, Raleigh, NC 27603- 
8003. 

Reason for Proposed Action: 

1 NCAC 39 .0101 - deletes items over which the state has no 



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PROPOSED RULES 



control and makes definitions conform with the Department 
of Environment , Health, and Natural Resources (DEHNR). 
1 NCAC 39 .0201 - makes existing criteria consistent with 
DEHNR and adds criteria needed as a result of G.S. 146. 

Comment Procedures: Any interested person may present 
his/her comments either in writing at the hearing or orally 
at the hearing. Any person may request information, 
permission to be heard or copies of the proposed regulations 
by writing or calling R. Glen Peterson, Department of 
Administration, 116 West Jones Street, Raleigh, NC 27603- 
8003. Phone: (919) 733-7232. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 39 - DEPARTMENT OF 
ADMINISTRATION'S MINIMUM CRITERIA 

SECTION .0100 - PURPOSE 

.0101 PURPOSE 

The purpose of these minimum criteria is to establish 
threshold levels for minor operations or small routine 
facility projects in this Rule which no filing of environmen- 
tal documents under G.S. 113A shall be required. The 
primary emphases of these minimum criteria are to: 

(1) insure that protection is provided to the environ- 
ment in the State Government Center and at other 
properties under the control of the Department of 
Administration throughout the state; 

(2) insure that environmental impacts are considered 
prior to approving activities on the state's sensitive 
areas, defined as those which are delineated or 
protected under one or more of the following: 

(a) Wetlands by the U.S. Army Corps of Engineers 
under 33 CFR 328.3 and 40 CFR 230.3; 

(b) National Historic Preservation and Conservation 
Act and National Executive Order 11593 and 
State Executive Order 16 administered by the 
North Carolina Department of Cultural Re- 
sources; 

(e) Prim e Agricultural and For es t Lands id e ntifi e d 

under P.L. 97 98 and State Executive Order 96; 

(c) (d) National Natural Landmarks as designated 
under the Historic Site Act at 16 USC 461; 

(e) Lnt e mational Biosph e rio R e s e n . ' e s d e signat e d by 

the United Nations under the UNESCO Act, 
P.L. 575 2, Btatutor)' 712; 

(d) (I) State Park Lands designated under G.S. 
113-44.9; 

(e) fg) State Game Lands administered under G.S. 
113-264 and 306(d); 

(f) ^ State Forest Lands administered under G.S. 
113-22 and 29; 

(g) {*) State Nature Preserves and Dedicated Natural 
Areas administered under G.S. 113A-164.1; 



(h) ^ Primary and Secondary Nurseries designated 
in accordance with under 15A NCAC 3R .0003; 
.0003 and ISA NCAC IOC .0503, and Critical 
Habitat Areas designated in accordance with 
15A NCAC 31 .0001; and I5A NCAC 101 
■0001(a)(5); 
(i) fk) State High Quality Outotanding Rooouroo 
Waters designated m accordance with under 15 A 
NCAC 2B rOii^ .0201(d); this includes waters 
classified as WS-I. WS-IL SA and ORW (Out- 
standing Resource Waters); by th e Environmen 
tnl Management Commisgion; 
(i) (4) State Natural and Scenic Rivers designated 

under G.S. 113A-30; 
(k) fm) North Carolina Coastal Reserves designated 

under G.S. 113A-129.1; 
£1) (ft) State Lakes administered under G.S. 146-3; 
and 
(m) (©) Lands which contain animal or plant species 
protected by the Federal Threatened and Endan- 
gered Species Act (administered by the U.S. 
Fish and Wildlife Service), State Endangered 
and Threatened Wildlife and Wildlife Species of 
Special Concern Act (G.S. 113-331 administered 
by the North Carolina Wildlife Resources Com- 
mission), State Plant Protection and Conserva- 
tion Act (G.S. 106-202.12 administered by the 
North Carolina Department of Agriculture); 
All the laws or rules in this Rule are incorporated 
by reference and include subsequent amendments. 
Copies are available at the Department of Envi- 
ronment, Health, and Natural Resources; and 
(3) permit the implementation of the routine opera- 
tions, maintenance, repair, or construction tasks 
which the state is required to undertake without 
undue delay or expense. 

Statutory Authority G.S. 113A-11. 

SECTION .0200 - NON-MAJOR ACTIVITIES 

.0201 NON-MAJOR ACTIVITIES 

The following list of criteria shall be considered as 
descriptive of routine operations, small construction pro- 
jects, and routine maintenance projects which do not require 
the filing of an Environmental Impact Statement, Environ- 
mental Assessment, or a Finding of No Significant Impact: 

(1) Any action which involves relocation of staff 
members into a site using existing State buildings 
or leased buildings for which the building occu- 
pancy classification is not changed. 

(2) Routine disposal operations of hazardous chemi- 
cals, asbestos, or other environmentally sensitive 
operations for which a written procedure has been 
established, reviewed by appropriate authority, 
and determined to be in keeping with state or 
federal law. 



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(3) Routine repairs and housekeeping projects which 
maintain a facility's original condition and physi- 
cal features, including re-roofing and minor 
alterations where in-kind materials and techniques 
are used. This also encompasses structures 50 
years of age and older and for which no separate 
law, rule, or regulation dictates a formal review 
and approval process. 

(4) Demolition of or additions, rehabilitation and/or 
renovations to a structure not listed in the National 
Register of Historic Places or less than 50 years of 
age. 

(5) Purchase by the Department of Administration for 
Department of Administration's use of real estate 
for which the use of the real estate does not vary 
from its intended purpose or function at the time 
of purchase or is consistent with local land use 
plans. 

(6) The use of chemicals for boiler feedwater treat- 
ment, cooling tower water treatment, pesticides, 
herbicides, cleaning solvents, and other chemical 
products which may be considered environmen- 
tally sensitive, provided the materials are stored 
and utilized in keeping with the applicable Mate- 
rial Safety Data Sheet (MSDS). 

(7) The handling of asbestos incident to a repair, 
maintenance, or minor construction project pro- 
vided that the asbestos material is removed, 
stored, disposed of, and handled in accordance 
with published Department of Administration's 
procedures for processing asbestos. 

(8) New construction involving all of the following: 

(a) A footprint of less fcess than 10,000 square feet; 
fb) Less — than — twe — hundr e d — thouoond — dollars 

($200,000) cost; 

(b) (e) Losa than one acre? of proviously undiaturbod 
ground unlosa tho site is A location that is not a 
National Register archa e ological Archaeological 
site; and 

(c) fd) The use of the structure does not involve 
the handling and/or the storage of hazardous 
materials. 

(9) Routine grounds maintenance and landscaping. 

(10) Routine repair of existing parking lots. 

(11) Installation of outdoor sculpture(s) or exhibits. 

(12) Granting of leases, easements, or permits autho- 
rizing use of public land for any of the following: 

(a) Installation of aerial and sub-aqueous pipes or 
pipelines for the transportation of potable water, 
and any cable line or line for the transmission of 
electrical energy, not requiring a certificate of 
environmental compatibility and public conve- 
nience from the North Carolina Utilities Com- 
mission, telephone or telegraph messages, and 
radio and television communications. 

(b) Communication towers not located in sensitive 
areas as defined in Rule .0101(2) of this Chap- 



ter. 

(c) Construction of a road in accordance with 
accepted design practices and in compliance with 
North Carolina Department of Transportation 
standards and sjjecifications, involving less than 
25 cumulative acres of ground surface not 
located in sensitive areas. 

(d) Filling below the mean high water mark when 
such filling has been approved by the U.S. 
Army Corps of Engineers or the North Carolina 
Division of Coastal Management. 

(e) Sewer line installations not exceeding the mini- 
mum criteria of the permitting agency and not 
located in sensitive areas. 

(f) Ground water withdrawals not exceeding the 
minimum criteria of the permitting agency and 
not located in sensitive areas. 

(g) Where the proposed privat e use of the public 
land does not exceed the minimum criteria 
established by the agency recommending the 
lease, easement, or permit. 

fh) Piers and boat docks on aU State Lakes when 

conducted in accordance with 15A NCAC 12C 

■0300. 
(i) Structures or piers and boat docks involving less 

than 1 1 slips. 
(j) Granting of easements for existing structures in 

accordance with G.S. 146. 

(13) Exchange or purchase of land where no agreement 
exists for the private land to be developed for use 
in any way that results in a change in the natural 
cover or topography prior to the exchange or 
purchase. 

(14) Timber harvest in accordance with the National 
Forest Service or the North Carolina Division of 
Forest Resources Management's Plans and recog- 
nized best management practices. 

Statutory Authority G.S. 113A-11. 



TITLE 2 - DEPARTMENT OF AGRICULTURE 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the North Carolina Pesticide Board 
intends to adopt rule cited as 2 NCAC 9L . 1806. 

Proposed Effective Date: March 1, 1996. 

A Public Hearing will be conducted at 12:30 p.m. on 
January 9, 1996 at the Gov. James B. Hunt, Jr. Horse 
Complex, 4601 Trinity Rd. , Raleigh. NC 27607. 

Reason for Proposed Action: 77n.v rule defines crop 
advisors in North Carolina and allows these individuals to 
take advantage of the Worker Protection Standard crop 
advisor exemptions contained in federal regulations which 



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were adopted by reference by the North Carolina Pesticide 
Board. These crop advisors are exempted from certain 
provisions of the Worker Protection Standard only while 
performing crop advisor tasks which are also defined in this 
proposed action. 

Comment Procedures: Interested persons may present 
statements either orally or in writing at the public hearing 
or in writing prior to the hearing by mail addressed to John 
L. Smith, Secretary, North Carolina Pesticide Board, P.O. 
Box 27647, Raleigh, NC 27611. 

Fiscal Note: This Rule does not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 9 - FOOD AND DRUG 
PROTECTION DIVISION 

SUBCHAPTER 9L - PESTICIDE SECTION 

SECTION .1800 WORKER PROTECTION 

STANDARDS FOR AGRICULTURAL 

PESTICIDES 

.1806 CROP ADVISOR EXEMPTION 

For the purposes of exemptions contained in Sections 
170.104 and 170.204 of the Worker Protection Standard, the 
following definitions will be in effect throughout 2 NCAC 
9L .1800: 

(1) "Crop Advisor" means any currently certified and 
licensed "pest control consultant" as defined in 
G.S. 143-460(27) while engaged in the perfor- 
mance of crop advisor tasks as defined in this 
Rule and any "pesticide applicator" as defined in 
G.S. 143-460(29) who is currently certified and 
licensed in the subcategory "Demonstration and 
Research Pest Control " as defined in 2 NCAC 9L 
.0504(9). but only while performing or supervis- 
ing the performance of crop advisor tasks as 
defined in this Rule. 

(2) "Crop Advisor Tasks" include assessing pest 
numbers or damage, pesticide distribution, or 
status or requirements of agricultural plants. 

Statutory Authority G.S. 143-458(a). 



TITLE 4 - DEPARTMENT OF COMMERCE 

Notice is hereby given in accordance with G.S. 
150B-2I.2 tltat the North Carolina Alcoholic Beverage 
Control Commis.'iion intends to adopt rules cited as 4 NCAC 
2R .0305: 2S .0109, .0904, . 1021: 2T .0308 - .0309, .1104 
- .1108: amend rules cited as 4 NCAC 2R .0303, .1708. 
.1710, 1801 - .1802: 2S .0102 - .0103, .0105 - .0106, 
.0228, .0234 - .0235, .0402 - .0404, .0511 - .0513. .0516, 
.0519, .0525, .0614. .0708, .0901 - .0903. .1005. .1008, 



.1011: 2T .0101 - .0102, .0201, .0206, .0301, .0303 - 
.0305, .0502, .0601 - .0602, .0604, .0606, .0707 - .0709, 
.0711 and repeal rules cited as 4 NCAC 2S .0209: 2T 
.0202, .0302, .0409- .0411. 

Proposed Effective Date: June 1, 1996. 

A Public Hearing will be conducted at 10:00 am on 
February 9, 1996 at the Commission Hearing Room, 3322 
Gamer Road, Raleigh, NC. 

Reason for Proposed Action: To respond to petitions for 
rulemaking from industry; to update product approval 
procedures: to delete certain burdensome requirements for 
mixed bex'erages applicants and permittees: to set forth 
additionnal requirements for certain unique permit applica- 
tions: to establish guidelines for tastings and samplings; to 
establish requirements for fuel alcohol plants; and to make 
miscellaneous technical and conforming changes to existing 
rules. 

Comment Procedures: Written comments concerning 
proposed rule changes should be submitted no later than 
February 9, 1996. Oral comments may be presented at the 
hearing. Written comments and notices of intention to make 
oral comment should he directed in advance to Ann S. 
Fulton, General Counsel, PO Box 26687, Raleigh, NC 
27611-7687, (919) 779-0700. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 2 - ALCOHOLIC 
BEVERAGE CONTROL COMMISSION 

SUBCHAPTER 2R - ORGANIZATIONAL 
RULES: POLICIES AND PROCEDURES 

SECTION .0100 - GENERAL PROVISIONS 

.0303 DISTRIBUTION, INSPECTION AND COPIES 
OF ABC LAWS 

(a) Distribution of Rules and Statutes. A copy of the 
Commission's Rules and Chapter 18B of the General 
Statutes will be distributed at no charge to each local ABC 
board, each ALE agent, ABC officer and local law enforce- 
ment officer employed by a contracting agency pursuant to 
G.S. 18B-501(f). and to each employee of the Commission. 

(b) Reprints of Statutes and Rules. Bound re prints of the 
ABC laws are available as follows: Purcha s ing Copie s of 
the ABC Law s . Copies of the ABC laws are available to 
any int e r e st e d p e rson who contact s th e Commi ss ion at th e 
following addr ess or phon e numb e r: 

North Carolina Alooholio Bavorage Control Commi ss ion 

3322 Gamor Road 

P.O. Box 26687 

Raleigh. NC 27611 6687 



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PROPOSED RULES 



(910) 779 0700 
The following it e mo are available and should b e purchas e d 
togeth e r for oomploto aoo o o s to the ABC lawo of this State: 

(1) Chapter 18B of the North Carolina General 
Statutes, at a cost of oovon dollars ($7.00). 
Chapter 188. containing the statutes governing 
alcoholic beverages, along with related statutes. 
is available from the Commission, at: 

3322 Gamer Road. 
PO Box 26687. 
Raleigh. NC 27611-6687 
Phone: (919) 779-0700. 
This reprint is available for ten dollars ($10.00). 
Payment by cash or check must be made prior to 
receiving the reprint. 

(2) Title 4. Chapter 2 of the North Carolina Admin 
istrativo Code, containing all the rule s of th e 
Commisoion. at a coot of seven dollars and Txity 
oonts ($7.50). Title 4. Chapter 2 of the North 
Carolina Administrative Code, containing all the 
rules of the Commission, is available from: 

Barclay's Law Publishers 

PO Box 3066 

South San Francisco. CA 94083-3066 

1 (800) 888-3600 

Payment b>' check or oaoh must b e mad e prior to 

roooiving copi e s of e ither publication. 

(c) Copies of Individual Rules or Statutes. For a fee of 
twent>-five cents ($0.25) per page, copies of rules, amend- 
ments and general statutes are available to any person 
contacting the Commission at the address and phone number 
in Paragraph (b) of this Rule. 

(d) Public Inspection of Records. Inspection of records 
and documents in the possession and custody of the Com- 
mission is governed by the provisions of Chapter 132 of the 
North Carolina General Statutes. Fees for copying public 
records shall be twenty-five cents ($0.25) per page. 

Statutory Authority G.S. 12-3.1; 18B-207; 132-1 through 
132-1.3; 132-6. 



Statutory Authority G.S. 12-3. 1(c); 18B-207. 

SECTION .1700 - RETAIL SALES OF ALCOHOLIC 
BEVERAGES 

.1708 MAXIMUM QUANTITIES ALLOWED TO 
BE SOLD 

Employees of local boards are expressly prohibited from 
selling more than ftve eight liters of fortified wine or 
spirituous liquor or more than #v« eight liters of the two 
combined to a person at any one time, except as authorized 
under G.S. 18B-403 and G.S. 18B-404. 

A copy of all Purchase/Transportation Permits shall be 
maintained by local boards for a period of one year follow- 
ing issuance. A copy of all Mixed Beverages Pur- 
chase/Transportation Permit/Invoice forms shall be retained 
by the local board for a period of at least three years. 

Statutory Authority G.S. 18B-207; 188-403; 18B-404; 
18B-807. 

.1710 CREDIT CARD SALES 

A local board may allow customers to purchase alcoholic 
beverages with credit credit, debit and ATM cards so long 
as all the following conditions are met: 

(1) The local board files with the Commission a 
written request for approval to implement the use 
of credit credit, debit and ATM cards, and fur- 
nishes in that request the following: 

(a) proposed date of implementation; 

(b) proposed bank or institution for clearing; 

(c) proposed discount rate and transaction fees ; and 

(d) whether instant verification equipment will be 
us e d; used. 

(2) The local board must receive written authorization 
from the Commission to allow credit credit, debit 
and ATTvl card sales; sales. 

(3) Th e minimum alcoholic b e v e rag e purchas e that 
may b e charg e d to a cr e dit card is tw e nty dollars 
($20.00). 



.0305 TRANSCRIPT FEES; TAPES 

(a) Availability. Transcripts of proceedings during which 
oral evidence is presented will be made only upon request 
of a party. 

(b) Transcript costs shall include the cost of preparing the 
original for the Commission. An attorney requesting a 
transcript on behalf of a party shall be a guarantor of 
payment for the costs. Costs for the preparation of a 
transcript shall be determined under the supervision of the 
Commission's administrator. An advance security deposit 
may be required of the party requesting the transcript to 
cover the prospective costs. The security deposit shall be 
applied to the actual cost and any excess shall be returned 
to the party submitting the deposit. 

(c) Copies of tapes of oral proceedings are available upon 
written request at a cost of three dollars ($3.00) per tape. 



Statutory Authority G.S. 18B-203(b); 18B-702(e); 18B-807. 

SECTION .1800 - PURCHASE-TRANSPORTATION 

PERMITS FOR INDIVIDUALS AND MIXED 

BEVERAGES PERMITTEES 

.1801 PURCHASE-TRANSPORTATION 
PERMITS: WINE: LIQUOR 

(a) Local Board to Issue. Whenever a person desiring to 
purchase more than 20 liters of unfortified wine, or more 
than ftve eight liters of either fortified wine or spirituous 
liquor or #ve eight liters of the two combined, applies to a 
local board for a Purchase-Transportation Permit, the local 
board shall issue the purchaser such a permit, following the 
guidelines of G.S. 18B-403. 

(h) Form. The Purchase-Transportation Permit shall be 



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PROPOSED RULES 



issued on a printed three-part form and shall specify the 
following information on the face of the permit: 

(1) the name and location of the store from which 
the purchase is to be made; 

(2) whether the purchase is for unfortified wine, 
fortified wine or spirituous liquor; 

(3) destination of the alcoholic beverages including 
name and address of location; 

(4) Special Occasions Permit number of a location, 
if alcoholic beverages are purchased for a spe- 
cial occasion; 

(5) time and date of commencement and conclusion 
of special occasion, if any; 

(6) quantity and type of alcoholic beverages pur- 
chased; 

(7) signature of local ABC official issuing the 
permit; 

(8) name, address and driver's license number of 
purchaser. 

The form shall contain a statement that the permit is valid 
for only one purchase on the date shown and will expire at 
9:30 p.m. on the date of purchase and a further statement 
that the permit shall accompany the beverages during 
transport and storage and be exhibited to any law enforce- 
ment officer upon request. 

(c) A local board issuing a Purchase-Transportation 
Permit shall retain one copy of the permit in its files for a 
period of one year and give the purchaser two copies, one 
of which the purchaser will give the store from which the 
alcoholic beverages are purchased. 

Statutory Authority G.S. 188-207; 18B-303(a); 188-403. 

.1802 MIXED BEVERAGE PERMIT/INVOICE 
FORM 

(a) Providing Form. A local board in a jurisdiction in 
which the sale of mixed beverages is lawful shall provide to 
a mixed beverages permittee ordering and purchasing 
spirituous liquor for resale in mixed beverages a Pur- 
chase-Transportation Permit/Invoice Form for every 
purchase of liquor by the permittee. 

(b) Contents of Form; Copies. Each Pur- 
chase-Transportation Permit/Invoice Form shall be printed 
in triplicate and shall show on the face of the form the 
information required by S .0502 of thc 9 c Rules 4 NCAC 2S 
.0502 . The local board shall retain one copy in its perma- 
nent records for a period of three years and shall give one 
copy of the permit/invoice to the mixed beverages permittee 
or designated employee to accompany the liquor during 
transport. 

Statutory Authority G.S. 188-205; 188-207; 188-404(b). 

SUBCHAPTER 2S - RETAIL BEER: WENE: MIXED 

BEVERAGES: BROWNBAGGENG: ADVERTISING: 

SPECIAL PERMITS 



SECTION .0100 - DEFINITIONS: PERMIT 
APPLICATION PROCEDURES 

.0102 APPLICATIONS FOR PERMITS: 
GENERAL PROVISIONS 

(a) Forms. Application forms for all ABC permits may 
be obtained from the North Carolina Alcoholic Beverage 
Control Commission at the following address, or by tele- 
phoning the Commission between 8:00 a.m. and 5:00 p.m., 
Monday through Friday: 

North Carolina ABC Commission 

3322 Gamer Road 

P.O. Box 26687 

Raleigh, North Carolina 27611-6687 

(b) Statutory Requirements. Before the issuance of any 
ABC permit, an applicant shall comply with the statutory 
requirements of Articles 9 and 10 of Chapter 18B of the 
General Statutes and with the rules of the Commission. 

(c) Separate Permits Required. An applicant operating 
separate buildings or structures not connected directly with 
each other or businesses with separate trade names shall 
obtain and hold separate permits for each building or 
business for which he wants permits, and he shall pay the 
appropriate application fees as provided in G.S. 18B-902(d). 
Where there are multiple buildings, and the Commission 
determines that the business is operated as one entity, the 
Commission may, in its discretion, issue one permit. 

(d) Information Required on Application. An applicant 
for an ABC permit shall file a written application with the 
Commission and in the application shall state, under oath, 
the following information: 

(1) name and address of applicant: 

(2) corporate corporate, company or partnership 
name; 

(3) mailing address and location address of business 
for which permit is desired, and county in which 
business is located; 

(4) trade name of business; 

(5) name and address of owner of premises; 

(6) applicant's date and place of birth; 

(7) if a corporation, limited liability company or 
limited partnership, the name and address of the 
registered agent or e mploy ee authorized to serve 
as process agent (person upon whom legal 
service of Commission notices or orders can be 
made); 

(8) if a non-resident, name and address of person 
appointed as attorney-in-fact by virtue of duly 
executed and registered power of attorney; and 

(9) a detailed diagram of the premises showing: 

(A) entrances and exits; 

(B) storage area for alcoholic beverages; 

(C) locations where alcoholic beverages may be 
served or consumed. 

In addition, an applicant shall state, under oath, that he is 
the actual and bona fide owner or lessee of the premises for 
which a permit is sought and shall submit a copy or memo- 



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randum of the lease showing the applicant as tenant, or a 
copy of the deed showing the applicant as the grantee or 
owner; that he intends to carry on the business authorized 
by the permit himself or under his immediate supervision 
and direction; and that he is an actual and bona fide 
resident of the State of North Carolina or, as a non-resident, 
has appointed, by virtue of a duly executed and registered 
power of attorney, a resident manager to serve as attor- 
ney-in-fact who will manage the business and accept service 
of process and official Commission notices or orders. 

(e) General Restriction; Living Quarters. No permit for 
the possession, sale or consumption of alcoholic beverages 
shall be issued to any establishment when there are living 
quarters connected directly thereto, and no permittee shall 
establish or maintain living quarters in or connected to his 
licensed premises. 

(f) General Restriction; Restrooms. No permit for the 
on-premises possession, sale, or consumption of alcoholic 
beverages shall be issued to any establishment unless there 
are two restrooms in working order on the premises. This 
requirement may be waived upon a showing that the 
permittee will suffer undue financial hardship or the safety 
of the employees will be jeopardized. 

(g) Areas for Sales and Consumption. In determining the 
areas in which alcoholic beverages may be sold and con- 
sumed, the Commission will consider the convenience of the 
permittee and his patrons, allowing the fullest use of the 
premises consistent with proper control, but will attempt to 
avoid consumption in areas open to the general public other 
than patrons. 

(h) Temporary Permits for Continuation of Business. In 
its discretion the Commission may issue temporary permits 
to an applicant for the continuation of a business operation 
that holds current ABC jjermits when a change in ownership 
or location of a business has occurred. To obtain a tempo- 
rary permit an applicant shall submit the appropriate ABC 
permit application form, all required fees, a lease or other 
proof of legal ownership or possession of the property on 
which the business is to be operated, and a written statement 
from the ALE agent in that area stating that there are no 
jjending ABC violations against the business. An applicant 
for a temporary permit should also submit the permits of 
the prior permittee for cancellation prior to the issuance of 
any temporary permit. No temporary permit shall be issued 
to any applicant unless all prior ABC permits issued for the 
premises have been cancelled by the Commission. 

(i) Retail Sales at Public Places Restricted. The sale and 
delivery of alcoholic beverages by licensed retail outlets 
located on fair grounds, golf courses, ball parks, race 
tracks, and other similar public places are restricted to an 
enclosed establishment in a designated place that has been 
approved by the Commission. No alcoholic beverages, shall 
be sold, served, or delivered by these outlets outside the 
enclosed establishment, nor in grondetondo, otadiumo or 
bl & aoh e ro at public gatherings, except as provided in this 
Rule. 

As used in this Rule, the term "enclosed establishment" 



shall include a temporary structure or structures constructed 
and used for the purpose of dispensing food and beverages 
at special events to be held on fairgrounds, golf oourooo, 
ball parks, race tracks, and other similar places. 

Sales of alcoholic beverages may be made in seating areas 
such as be* grandstand or stadium seats only under the 
following conditions: 

(1) table service of food and non-alcoholic bever- 
ages are is available to patrons in be* seats; 

(3) no alooholio b e v e ragoo are d e liv e r e d to the box 
s e ats area until aft e r ordoro have boon tok e n; and 

(2) (3) box soat seating areas have been designated 
as part of the permittee's premises on a diagram 
submitted by the permittee, and the Commission 
has granted written approval of alcoholic bever- 
age sales in these seating areas. 

(j) Separate Locations at Airport. If one permittee has 
more than one location at the terminal of an airport boarding 
at least 150,000 passengers annually and that permittee 
leases space from the airport authority, the Commission 
recognizes that allocation of space is controlled by the 
airport authority. Therefore, the permittee in such a 
situation may: 

(1) obtain a single permit for all its locations in the 
terminal; 

(2) use one central facility for storing the alcoholic 
beverages it sells at its locations; and 

(3) pool the gross receipts from all its locations for 
determining whether it meets the requirements of 
G.S. 188-1000(6) and Rule .0519 of this Sub- 
chapter. 

(k) Food Businesses. Unless the business otherwise 
quahfies as a wine shop primarily engaged in selling wines 
for off-premise consumption, a food business will qualify 
for an off-premise fortified wine permit only if it has and 
maintains an inventory of staple foods worth at least one 
thousand five hundred dollars ($1,500) at retail value. 
Staple foods shall include meat, poultry, fish, bread, 
cereals, vegetables, fruits, vegetable and fruit juices and 
dairy products. Staple foods do not include coffee, tea, 
cocoa, soft drinks, candy, condiments and spices. 

Statutory Authority G.S. 18B-207; 18B-900; 18B-901(d); 
18B-902; 18B-903; 18B-905; 18B-1000(3); 18B-1008. 

.0103 CORPORATIONS AND LIMITED 

LIABILITY COMPANIES HOLDING 
PERMITS 

Any corporation or limited liability company holding an 
ABC permit in this State that seeks permits for any addi- 
tional business location shall have the manager of the new 
location file the appropriate application and fee, and qualify 
under G.S. 18B-900(a). 

Statutory Authority G.S. 18B-207; 18B-900; 18B-902(a): 
18B-903(d). 



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.0105 SPECIAL REQUIREMENTS FOR 
RESTAURANTS 

(a) Requirements to Qualify for Brownbagging, 
On-premise Fortified Wine, Mixed Beverages, or Modified 
Plan Permits. To qualify as a restaurant for a 
Brownbagging, on-premise Fortified Wine or Mixed 
Beverages Permit, or a Malt Beverages Permit in areas 
approving on-premise malt beverages under G.S. 
18B-602(a)(4), a business shall have an inside dining area 
set aside for the service of meals that contains seating for at 
least 36 persons. Food shall be available at all times that 
alcoholic beverages are being served. 

(b) Typical Characteristics. Although a facility need not 
possess all of the following characteristics to qualify as a 
restaurant, each is typical of a bona fide restaurant and the 
Commission may consider the extent to which a facility 
possesses these characteristics in deciding whether to issue, 
suspend, or revoke the permits listed in Paragraph (a): 

(1) The facility has a printed menu listing full 
meals with substantial entrees; 

(2) The facility has complete cooking and refrigera- 
tion equipment; 

(3) The greatest portion of the food sold is prepared 
in the facility's own kitchen and prepackaged 
food is only an incidental part of the sales; 

(4) The greatest portion of the food sold is con- 
sumed on the premises; 

(5) There are separate kitchen and service staffs; 

(6) Seating for dining customers is primarily at 
tables; 

(7) Only a small portion of the premises is devoted 
to activities unrelated to the service and con- 
sumption of food; and 

(8) Sales of food are significantly greater than sales 
of nonalcoholic beverages, especially nonalco- 
holic beverages sold as "set-ups." 

(c) Requirements for Application. For a restaurant to 
obtain a permit listed in Paragraph (a), the applicant shall 
submit to the Commission the appropriate application fee 
and the following documents: 

(1) a completed application on a form provided by 
the Commission, which shall include the full 
names and addresses of all owners, officers, 
directors, members, or shareholders owning 25 
percent or more of the stock or other interest in 
the business , and the manager; if, however, a 
corporation or limited liabilitv company holds 
any other ABC permit, application by the man- 
ager shall be sufficient; and 

(2) a copy of the restaurant's menu or list of food 
o e r . ' e d; served. 

(5) photograph s of s ufficient detail — to show the 
following: 
fA) e ntire kitch e n, including all e quipm e nt; 
(B) all dining ar e as, — showing o e ating arrange 
ments, including patios or outdoor areas where 
alcoholic beverages may bo sold or consumed; 



(€) bars, counters, mixing stations; 

(B) look e d storag e ar e a or ar e as for storage of 
alooholio bev e rages; 

(E) front exterior of promises or if establishment 
is located in an office building, mall or other 
larg e r structur e , th e main entrance. 

Statutory Authority G.S. 18B-207; 18B-900; 188-901; 
18B-902: 188-1000(6); 188-1008. 

.0106 SPECIAL REQUIREMENTS FOR HOTELS 

(a) Requirements to Qualify for Brownbagging, 
On-premise Fortified Wine, Mixed Beverages, or Modified 
Plan Permits. To qualify as a hotel for a Brownbagging or 
a Mixed Beverages Permit, or a Malt Beverage Permit in 
areas approving on-premise malt beverages under G.S. 
18B-602(a)(4), an establishment shall have on or closely 
associated with its premises a full-service restaurant provid- 
ing at least 36 seats. The restaurant may or may not be 
owned by the same person who owns the hotel. (If the 
restaurant is owned by a person different from the owner of 
the hotel, permits shall not be issued to the restaurant unless 
it qualifies under Rule .0105 of this Section). 

(Id) For a hotel to obtain one of the permits listed in 
Paragraph (a), the applicant shall submit to the Commission, 
the appropriate application fee and the following documents: 

(1) a completed application on a form provided by 
the Commission, which shall include the full 
names and addresses of all owners, officers, 
directors, members, shareholders owning 25 
percent or more of the stock or other interest in 
the business, and the manager; if, however, a 
corporation or limited liabilitv company holds 
any other ABC permit, application by the man- 
ager is sufficient; and 

(2) a copy of the restaurant's menu or a list of food 
3cr . 'ed; served. 

f3^ photographs of cuffioi e nt d e tail — to show th e 
following: 
fA) entire kitchen including all equipment; 
(B) all permanent dining area s , s howing se ating 
arrang e m e nts, including patio or outdoor areas 
wh e r e alooholio b e v e rag e s might be s e r . ' e d or 
consumed; 
(€) bar s , counters and mixing stations; 
fD) lock e d s torag e ar e a or ar e as; and 
fE) front e xt e rior of hotel and r es taurant. 
(c) Locations Where Sales Permitted. Brownbagging by 
patrons, consumption of alcoholic beverages and sales of 
mixed beverages are allowed at any time during lawful 
hours in the restaurant and in any lounge or other place that 
is customarily open to the general public and that is associ- 
ated with the restaurant. These lounges and other places 
need not be directly connected to the restaurant as long as 
the services of the restaurant are available to the lounge at 
all times that alcoholic beverages are being served. Sales 
and consumption of mixed beverages are allowed in banquet 



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1679 



PROPOSED RULES 



rooms, convention rooms, suites and similar places not 
usually open to the general public only during scheduled 
events and only to jDcrsons attending those events. Portable 
bars may be used for the sale or mixing of mixed beverages 
in those rooms. 

(d) Diagram of Premises. The diagram of the premises 
submitted with the application for a permit under this Rule 
and the diagram approved by the Commission when the 
permit is issued shall be marked to indicate which spaces 
are considered part of the restaurant and lounge or other 
places associated with the restaurant and customarily open 
to the general public, and which spaces are considered 
banquet rooms, convention rooms, meeting rooms, 
suites, and similar places where mixed beverages are to be 
sold only during scheduled events. 

(e) Managers" Receptions. Hotels operating lodging, 
restaurant and lounge facilities under one set of ABC 
permits may offer lodging guests up to two alcoholic 
beverages per guest per day in the price of the room 
package under the following conditions: 

(1) The reception or social hour is held on the 
licensed premises of the hotel; 

(2) The hotel issues a voucher for the beverages that 
can be used by the guest to obtain the beverage 
of his choice; 

(3) Nonalcoholic beverages shall also be offered to 
lodging guests during the function; and 

(4) The hotel must account for the beverages by an 
internal accounting procedure to insure that the 
price of each beverage included in the room rate 
package is the same price as is being charged 
other patrons in the lounge or restaurant for the 
same beverage. This procedure must be accept- 
able to the Commission's Audit Division. 

(f) Guest Room Cabinet Permits; Application Require- 
ments. Applications for a Guest Room Cabinet permit will 
be accepted only from hotels with Mixed Beverages permits, 
or from hotels simultaneously applying for Mixed Beverages 
permits, in the following counties: Buncombe, Cumberland, 
Durham, Forsyth, Gaston, Guilford, Mecklenburg, Moore 
and Wake. 

In addition to the general requirements for permit applica- 
tions in this Rule and in Rule .0102 of this Section, a hotel 
applying for a Guest Room Cabinet permit shall submit the 
following items along with the completed application form 
and appropriate fee: 

( 1 ) List of lodging rooms by room number in which 
cabinets will be placed; 

(2) Total number of lodging rooms and total number 
of rooms set aside that will not have a cabinet; 

(3) Description of cabinets to be installed by the 
hotel. A manufacturer's brochure describing the 
cabinet will be sufficient, or the permittee may 
submit photographs and a written description of 
the lock used on the cabinet; 

(4) Written policies developed by the permittee 
regarding the procedures that will be imple- 



(A) 

(B) 

(C) 

(D) 



(E) 



men ted by the hotel to: 
insure no one under 21 is able to obtain a key 
to the cabinet; 
control inventory; 

insure price lists for items sold from cabinets 
are easily readable; 

dispose of all opened alcoholic beverage con- 
tainers sold from cabinets after guest has 
checked out; 

maintain adequate numbers of ice and soft 
drink vending machines elsewhere on the 
premises. 



Statutory Authority G.S. 18B-207; 18B-900; 18B-901; 
183-902; 188-1000(4); 188-1001(13); 188-1008; S.L. 1991, 
c. 565, s. 7. 

.0109 CERTinCATION OF A SPECIAL ABC AREA 

Before the ABC Commission may issue anv ABC permit 
to an establishment located in a "Special ABC Area" as 
defined in G.S. 18B-101(13a), that "Special ABC Area" 
must be certified as follows: 
(1) If the "Special ABC Area" is a municipal corpora- 
tion, and is to be established pursuant to G.S. 
18B-603(f2)(i), the mayor, town clerk or town 
manager shall certify to the Commission that the 
vote establishing the "Special ABC Area" was 
conducted in accordance with the provisions of 
G.S. 18B-600, et. seq. and such person shall also 
certify to the Commission that the "Special ABC 
Area" complies with all of the requirements of 
G.S. 18B-101(13a). 
121 If fhs "Special ABC Area" is an unincorporated 
area and is to be established pursuant to G.S. 18B- 
603(f2)(ii), 
(a) The meeting at which the vote purporting to 
establish the "Special ABC Area" is held shall 
be called in accordance with all rules and by- 
laws of the private association or club located in 
the "area"; and 
fb) Notice of that meeting shall be given to all 
association members, all club members, all lot 
owners in the "area", and all home owners in 
the "area," in compliance with the rules and by- 
laws of the private association or club conduct- 
ing the vote, and 

(c) At the meeting at which the vote is held, there 
shall be a map of the proposed "Special ABC 
Area" displayed and a copy of that map shall be 
attached to the ballot. Tliis map shall show the 
proposed "area" with such specificity so as to 
allow the boundaries of that area to be easily 
determined by the Commission or other inter- 
ested persons; and 

(d) If the vote passes, the Board of Directors of the 
association or club that conducted the vote shall 
submit a certified copy of the map referenced in 



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PROPOSED RULES 



Subitem (2)(c) of this Rule, a certified copy of 
the ballot, a certified result of the vote, a certifi- 
cation that the vote was held in accordance with 
Subitem (2)(a) and (h) of this Rule, and a certifi- 
cation that the "Special ABC Area" created 
complies with all of the provisions of G.S. 18B- 
lOinSa) including a certification of the approxi- 
mate acreage of the "area", the number of 
permanent residents of the "area." and the date 
when municipal services were first provided in 
the "area". 

Statutory Authority G.S. 18B-101(13a); 18B-207; 18B- 
603(f2). 

SECTION .0200 - GENERAL RULES AFFECTING 

RETAILERS AND BROWNBAGGING 

PERMITTEES 

.0209 USE OF PROFANITY PROHIBITED 

Ne-pe rmittoo or his omployoos shall u se or permit tho use 
by any othor portion of loud, profane or indooont languag e . 

Statutory Authority G.S. 183-207; 18B-1005(a)(6). 

.0228 DISPENSING ALCOHOLIC BEVERAGES: 
PRODUCT IDENTIFICATION 

(a) Malt Beverages; On-Premises. Malt beverages may 
be sold by persons holding on-premise permits in the 
original containers, by the glass, or by the pitcher. 

The brand product name of draught malt beverages 
dispensed in retail outlets shall be shown on the knobs of 
draught faucets. Covers for these faucets bearing a brand 
product name may be used if the brand name appearing on 
the cover corresponds with the brand name on the knob of 
the faucets that are to be used for that brand product . 

(b) Malt Beverages; Off-Premises. Malt beverages may 
be sold by persons holding a retail off-premise permit only 
in the unopened original container that was filled by the 
product manufacturer. 

(c) Wine; On-premise. A person holding an on-premises 
wine permit may sell wine in the unopened original con- 
tainer, by the carafe, by the glass, or mixed with 
non-alcoholic beverages. 

Wine served in carafes or by the glass may be dispensed 
under pressure from nitrogen from sealed bulk containers 
provided the containers and dispensing systems have been 
approved by the Commission and the State Commissioner of 
Health Services. 

The vintn e r, brand and typ e of wine products dispensed by 
the carafe or glass, except for the house wine, shall appear 
on the wine list; and whoro tho wino is di s pensed from bulk 
containers, tho vintnor, brand and typo shall bo shown on 
tho knobs of draught fauoots. list. 

(d) Use of Siphons. The use of siphons or other types of 
dispensers is allowed if the malt beverage or wine contents 
are dispensed directly from the original containers. 



Statutory Authority G.S. 18B-206; 18B-207. 

.0234 PRIVATE CLUBS: GENERAL 
PROHIBITIONS; GUESTS 

(a) Neither a private club permittee nor his employee 
shall: 

( 1 ) allow any person who is not a member or a bona 
fide guest of a member to be present as a patron 
on the premises of a private club; or 

(2) grant membership to the private club to any 
person earlier than three days from the receipt 
of his application for membership. 

(b) "House" Guests. No private club permittee or his 
employee shall admit patrons as "house" guests. 

(c) Employee Member. An employee who is also a 
member of the private club shall not admit a patron as his 
guest while that employee is on duty. 

(d) A member shall designate his own guest. If a 
member accepts a patron as his guest at the behest of the 
private club mixed bovorago s permittee or employee, then 
the Commission shall consider that member to be acting as 
the permittee's agent. 

Statutory Authority G.S. 18B-207; 18B-1008. 

.0235 PRIVATE CLUBS; RECIPROCAL 
MEMBERSHIPS 

A private club permittee may offer reciprocal member- 
ships to bona fide members of other private clubs under the 
following conditions: 

(1) Reciprocity may extend only to members of 
private clubs holding Mixed Beverages or 
Brownbagging permits issued by the Commission. 

(2) All clubs participating in reciprocal membership 
arrangements shall enter into a written agreement 
setting forth the terms of their arrangement, and 
each club shall adopt rules governing the use of 
their facilities by reciprocal members. The agree- 
ment and rules shall be filed with the Commission 
and made a part of the permittees' files. 
Private clubs entering into such agreements shall 
be located in different counti es , cities. 



(3) 
(4) 



A member of another club who is granted a 
reciprocal membership shall be required to show 
a valid membership card indicating he is a bona 
fide member of the reciprocal club each time he 
enters the facility. 



Statutory Authority G.S. 18B-207; 188-1008. 

SECTION .0400 - ADDITIONAL REQUIREMENTS 
FOR BROWNBAGGING PERMITTEES 

.0402 PRIVATE CLUBS: POSSESSION OF 
ALCOHOLIC BEVERAGES 

(a) Quantity. No private club brownbagging permittee 



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November 15, 1995 



1681 



PROPOSED RULES 



shall allow a member or guest of tho club a member to 
possess more than ftve eight liters of spirituous liquor or 
five eight liters of fortified wine, or live eight liters of the 
two combined; more than 80 liters of malt beverages (nine 
cases of 355 milliliter cans plus nine 355 milliliter cans, or 
seven cases of 473 milliliter cans plus one 473 milliliter 
can); or more than 20 liters of unfortified wine upon the 
premises. 

(h) Label Required. A permittee shall ensure that each 
container brought onto the premises is labeled immediately 
with the member's name substantially as it appears on the 
membership roster and that containers brought by guests are 
labeled with the names of the guest and the sponsoring 
member. 

(c) Possession by Permittee Not Holding Mixed Bever- 
ages Permit. A permittee not holding a Mixed Beverages 
Permit or his employee may maintain custody over a 
member's or guest's alcoholic beverages and locker key 
provided that during custody, the member or guest is 
present on the premises. The member's or guest's alcoholic 
beverages shall be used exclusively by the member and his 
bona fide guests, and the alcoholic beverage containers and 
locker key shall be returned to the member or guest before 
he leaves the premises. 

(d) Furnishing AlcohoUc Beverages Limited. Neither the 
permittee nor a member shall furnish or have furnished 
alcoholic beverages to other members or bona fide guests of 
members unless the member owning the beverages is 
physically present upon the premises. 



Statutory Authority G. S. 
18B'1006(b). 



18B-207; 188-1001(7); 



.0403 PRIVATE CLUBS: STORAGE OF 
ALCOHOLIC BEVERAGES 

(a) A private club brownbagging permittee shall see that 
alcoholic beverages are stored in compliance with the 
following conditions: 

(1) All alcoholic beverages stored at the club shall 
be kept in individual lockers that are labeled 
with the members' names as they appear on the 
membership roster; lockers shall remain locked 
when the member is not on the premises; 

(2) Each locker shall contain a lock that can be 
opened only with a key, and the key shall be 
possessed by the individual member when that 
member is not present on the premises of the 
club; 

(3) No member shall store, whether in one or more 
lockers, more than five eight liters of fortified 
wine or spirituous liquor, or five eight liters of 
the two combined; five eight liters of malt 
beverages; or five eight Uters of unfortified wine 
upon the premises; 

Note: For example, one member may store the 
above mentioned quantities of alcoholic bever- 
ages in the aggregate in one or more lockers. 



such as a beverage locker and a sports equip- 
ment locker on one premises, provided that 
beverage containers and lockers are labeled as 
required, and when he is not on the premises, 
the member has exclusive possession of the key 
or keys. 
(4) Alcoholic beverages belonging to different 

members shall not be stored in the same locker, 
except that a husband and wife may store alco- 
hoUc beverages in the same locker as long as the 
total quantity does not exceed the quantities 
stated in Subparagraph (3) of this Paragraph. 

(b) The permittee and his employee shall be responsible 
for returning to a member when he leaves the premises all 
malt beverages and unfortified wine brought to the club by 
the member in excess of the amounts that may be legally 
stored at the establishment by the member. 

(c) All alcoholic beverages left on the premises of the 
club contrary to the provisions of this Rule shall be de- 
stroyed by the permittee or his employee. 



Statutory Authority G. S. 
188-1001(7); 188-1008. 



188-207; 188-301 (b)(3); 



.0404 RESTAURANTS: HOTELS: DISPLAY: 
CONTROL OF BEVERAGES 

(a) A restaurant or hotel holding a Brownbagging Permit 
shall ensure that all fortified wine and liquor is possessed 
inconspicuously by patrons when they are not in a private 
dining area. 

(b) Every person possessing fortified wine or spirituous 
liquor in restaurants and hotels with Brownbagging Permits 
shall at all times retain control of his alcoholic beverages. 

Statutory Authority G.S. 188-207; 188-1001(7). 

SECTION .0500 - ADDITIONAL REQUIREMENTS 
FOR MIXED BEVERAGES PERMITTEES 

.0511 PRE-MIXING DRINKS 

(a) Except as provided in this Rule, neither a mixed 
beverage permittee nor his employee shall pre-mix mixed 
beverages or prepare any mixed beverage before receiving 
an order for the beverage from a customer. 

(b) A mixed beverages permittee may pre-mix mixed 
beverages upon receiving Commission approval provided the 
following conditions are complied with: 

(1) No spirituous liquor may be used in the 
pre-mixing of mixed beverages except spirituous 
liquor on which the mixed beverages charge 
imposed by G.S. 18B-804(b)(8) has been paid. 
All spirituous liquor used for pre-mixing of 
mixed beverages shall be dispensed into the 
approved pre-mixing system from a container to 
which a mixed beverages tax stamp is affixed; 

(2) AH pre-mixing shall be done pursuant to a recipe 
that has been approved by the Commission. 



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PROPOSED RULES 



That recipe shall state the exact percentage and 
type or types of spirituous liquors and other 
alcoholic beverages used in the mixture; and 



(f) Lnvontor)' Records. — During the first year of operation, 
th e permittoo shall maintain on a daily baoio, an aoourato 
inv e ntor)' refl e cting additions to and withdrawalo from stock 



(5) Pro mixing shall bo limited to those approved that spocifios: 



rocipos for which tho pormittoo proparos and 
soUo at loaot fiv e gallono per woolc — Th o Com 
miosion — sbaH — withdraw — its — approval — for 
pro mixing of any rocipo for which this mini 
mum standard is not maintained; 
(3) f4) Only equipment and systems approved by the 
Commission shall be employed in the pre-mixing 
and dispensing of mixed bovoragcs; beverages. 
(#) A pormittoo that io authorized to pro mix mixed 
bev e rag e s shall maintain at all tim e s on accurat e 
inventor)' reflecting withdrawalo from hio spiri 
tuous liquor stock for purpo s e s of pro mixing 
that spocifios: 
fA) — tho brand and contain e r oiz e of e ach it e m 

withdrawn; 
(B) — tho date and time of withdrawal; and 
(€) — the date and time partially used containers are 
rotumod to storag e . 

Statutory Authority G.S. 18B-207. 

.0512 STORAGE ANfD DISPOSAL OF 

SPIRITUOUS LIQUOR CONTAINERS 

(a) Storage. All containers of alcoholic beverages 
possessed by a permittee for resale in mixed beverages shall 
be stored on the licensed premises, promioos in a ooparato 
aroa out of vi e w of tho patrons of th e e stablishm e nt, e xc e pt 
as provided in Paragraph (b) of this Rule. 

(fe3 — Container Display. — A permittee may keep at each 
mixing station on th e — pr o miso s a r e asonabl e numb e r of 
contain e rs of e ach brand of spirituous liquor lik e ly to b e 
used at that station, but no moro than one container of each 
brand shall bo open at one station at one tim e . — A mixing 
station is a count e r or other place wher e a bart e nd e r mix e s 
drinks to b e s e rs' e d to patrons. — G e n e rally, e ach bar count e r 
is considered a singlo mixing station, but a counter may 
contain moro than ono mixing station if it is so long that 
mor e than on e bartender is need e d to se rv e th e patron s at 
that count e r. In that cas e th e count e r is normally considered 
to have as many mixing s tation s a s there are bartenders at 
that counter. — Each portable bar is considered a single 
mixing station. 

(b) f&) Keys Required. Any lock used to secure the 
designated a storage area for alcoholic beverages shall be 
capable of being unlocked with a key that is available on the 
premises at all times. 

(d) — Official Inspections. — Th e d e signated storag e ar o a 
shall bo open to inspection by the Commission or law 
enforcement officers pursuant to G.S. 18B 502. 

(c) fe) Empty Containers. As soon as a container of 
spirituous liquor is empty, the permittee or his employee 
shall immediately and permanently deface the mixed 
beverages tax stamp and dispose of the bottle. 



f4^ brand and container size of oaoh item with 

drawn; 

(3) dat e of withdrawal; and 

{¥) date partially usod containers arc rotumod to 

storage. 
This inv e ntor)' shall be k e pt on a form approv e d by tho 
Commission. 

(d) fg) Guest Room Cabinet Permittees. A hotel that has 
been issued a Guest Room Cabinet Permit may store 
spirituous liquor and premixed cocktails purchased for resale 
from guest room cabinets in the same storage area with 
alcoholic beverages purchased for resale in mixed bevor 
ages, as provided in Paragraph (a) of thi s Rule beverages . 
A hotel shall not, however, place on display at mixing 
stations any 50 milliliter containers of liquor that were 
purchased for resale from cabinets. Empty or partially 
empty containers of alcoholic beverages purchased by a 
room guest from a cabinet shall be disposed of by the 
permittee after the room guest has checked out of the hotel. 

Statutory Authority G.S. 18B-207; 18B-502; 183-1001(13). 

.0513 PROHIBITED ACTS: HANDLING AND 
STORAGE OF LIQUOR 

Neither a mixed beverages permittee nor his employee, 
whether on or off the premises, shall: 

(1) add any alcoholic beverage to any container of 
spirituous liquor purchased for resale in mixed 
beverages; 

(2) transfer from one spirituous liquor container to 
another or remove from any liquor container the 
mixed beverages tax stamp or any other stamp, 
label, seal or device required by law to be affixed 
to the container; 

(3) destroy, alter or deface the mixed beverages tax 
stamp or any other stamp, label, seal or device 
required by law to be affixed to a liquor container 
before the container has been emptied; 

(4) possess a counterfeit mixed beverages stamp, 
place a counterfeit mixed beverages stamp on any 
liquor container, or knowingly possess any con- 
tainer with a counterfeit stamp; 

(5) store any spirituous liquor purchased for resale in 
mixed beverages in any place other than the 
approved storage area of the premises specified in 
the purchase-transportation permit; 

(6) place or have in th e approv e d s torag e ar e a or 
possess elscwhcro on the licensed premises any 
container of spirituous liquor not bearing a mixed 
beverages tax stamp except for liquor brought onto 
the premises by a host of a special occasion 
pursuant to G.S. 18B-I001(8) and G.S. 18B- 
1001(9) ; 



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1683 



PROPOSED RULES 



(7) dilute or otherwise tamper with the contents of 
any container of alcoholic beverages; 

(8) give or sell to any patron any container of spiritu- 
ous hquor that was purchased for resale as mixed 
beverages, whether the container is full or par- 
tially full; provided, however, this prohibition 
shall not be construed to prohibit a room guest 
from removing from the hotel a container of 
alcoholic beverages purchased from a guest room 
cabinet; 

(9) possess any empty container of spirituous liquor 
purchased for resale in mixed beverages if the 
mixed beverages tax stamp on that container has 
not been permanently defaced; 

(10) possess or sell on the premises any brand of 
spirituous liquor that has not been approved by the 
Commission for sale in North Carolina or that was 
not purchased by the permittee pursuant to an 
approved special order; 

(11) purchase any spirituous liquor for resale in mixed 
beverages other than as authorized by a valid 
purchase-transportation permit; 

(12) conceal or otherwise fail to indicate truthfully and 
accurately in any records required to be kept by 
the permittee the sale of any alcoholic beverages 
on the licensed premises; or 

(13) make any other incomplete, inaccurate, false or 
misleading statements in any report or record 
required by these Rules. 

Statutory Authority G.S. 18B-207; 18B-404; 188-1001(13); 
18B-1007; 18B-1008. 

.0516 PRIVATE CLUBS: MEMBERS' LIQUOR 
KEPT SEPARATE 

In a private club with both a Mixed Beverages Permit and 
a Brownbagging Permit, the {permittee shall comply with the 
following requirements: 

(1) The permittee shall not allow a member or guest 
to possess on the premises more than five eight 
liters of fortified wine or spirituous liquor, or five 
eight liters of the two combined, or more than 80 
liters of malt beverages other than draft malt 
beverages in kegs; 

(2) The permittee shall ensure that each container of 
alcoholic beverages brought onto the premises by 
a member or guest is labeled immediately with the 
member's name or the guest's and sponsoring 
member's names; 

(3) Neither a permittee nor a member shall furnish or 
have any person furnish a member's alcoholic 
beverages to another member or a guest of a 
member unless the member owning the beverage 
is present on the licensed premises; 

(4) Other than to label a container, or during private 
meetings or parties held under a Special Occasion 
Permit, neither a permittee nor an employee shall 



possess or maintain custody over a member's 
alcoholic beverages or a member's storage locker 
key, whether or not the member is present on the 
licensed premises. 

Note: This Paragraph prohibits the employees of 
the private club from handling a member's alco- 
hoUc beverages in any way whatsoever other than 
to put on the member's name label or when a 
private function is being held for a private group 
under a Special Occasion Permit, pursuant to G.S. 
186-1001(8). It is a violation of this Rule for a 
member's alcoholic beverages to be kept at or 
behind the bar where mixed beverages are pre- 
pared and sold. 

Statutory Authority G.S. 18B-207; 18B-1006(b); 18B-1008. 

.0519 RESTAURANTS: EMCOME FROM SALES 

(a) For the purposes of further defining a restaurant, as 
provided in G.S. 183-1000(6). the term "substantially 
engaged in the business of preparing and serving meals" 
means that moro than fift)' not less than forty percent of the 
estabUshment's food and beverage sales are from the sale of 
food and non-alcoholic beverages. 

(b) In determining what portions of sales can be attributed 
to the sale of food and non-alcoholic beverages, the follow- 
ing sales may be included: 

(1) food prepared in the permittee's kitchen and 
served as a meal to be consumed on the pre- 
mises or as a "take-out" order; 

(2) prepackaged food sold to accompany the meal; 

(3) non-alcoholic beverages sold to accompany the 
meal. 

(c) In determining what portions of sales can be attributed 
to the sale of food and non-alcoholic beverages, the follow- 
ing items may not be included: 

(1) mixed beverages, including the mixer; 

(2) any other alcoholic beverages; 

(3) grocery items not ordered and purchased with 
meals; 

(4) cover charges. 

Statutory Authority G.S. 18B-207; 18B-1000(6); 18B-1008. 

.0525 GUEST ROOM CABINETS; INVENTORY 
AND RECORDS 

A guest room cabinet permittee shall maintain on the 

premises complete and accurate inventory and sales records 

of all liquor purchased for resale in cabinets in accordance 

with the following requirements: 

(+) During the firot y e ar of op e ration with a Guoot 

Room Cabin e t p e rmit, inv e ntor^' r e cords for guest 

room cabinet liquor shall bo maintained as to 

quirod by Rulo .0512(f)(1) and (2) of this Scx^tion. 

(1) (5) Sales records of guest room cabinet liquor 

shall be kept on a monthly basis in accordance 

with the requirements of Rule .0520 of this Sec- 



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PROPOSED RULES 



tion. 
£2} (3^ Purchase-transportation permits for liquor to 
be sold from guest room cabinets shall be main- 
tained by the permittee on the premises for a 
period of three years. 

Statutory Authority G.S. 18B-207; 188-1001(13). 

SECTION .0600 - SPECIAL REQUIREMENTS FOR 

CONVENTION CENTERS, COMMUNITY 

THEATRES, SPORTS CLUBS, AND NONPROFTT 

AND POLFTICAL ORGANIZATIONS 

.0614 SPORTS CLUB: REQUIREMENTS FOR 
RECEIVING AND HOLDING PERMITS 

To be eligible to receive and to hold ABC permits as a 
sports club, in addition to the requirements imposed by G.S. 
18B-10(X){8), an establishment shall: 

(1) operate a golf oours e or a tannic court course, two 
or more tennis courts, or both on its premises, and 

(2) derive at least 15% of its club activity fees on an 
annual basis from sources other than receipts for 
food. 

Statutory Authority G.S. 18B-207; 18B-1000(5a); 18B-1008. 

SECTION .0700 - SPECIAL OCCASIONS PERMITS 

.0708 TYPES OF PERMITS REQUIRED 

The owner or operator of any commercial facility or 
commercial establishment renting or furnishing the premises 
thereof for a private function where the host of the function 
will possess more than fWe eight liters of fortified wine or 
spirituous liquor, or five eight liters of the two combined, 
shall either: 

(1) apply for and obtain a Special Occasion Permit, as 
required by G.S. 188-1001(8) and G.S. 188-902; 



in a manner designed to promote the purchase of that 
product by the customer. 

(c) A r e tail win e or malt b e v e mg e permitt ee may conduct 
tastings of wino or malt bovoragoa, as — appropriate. A 
tasting or sampling may be held on the a retailer's premises 
only if he holds the appropriate on-premises permit. Tast- 
ings and samplings shall be conducted in conformity with all 
A8C laws. 

Statutory Authority G.S. 18B-207. 

.0902 TASTINGS HELD FOR NON-PERMITTEES 

Where the legal sale of those beverages is permitted, an 
industry m e mb e r member, retailer or other person may 
furnish wine or malt beverages for tastings for consumers 
provided that: 

(1) The tasting is conducted for promotional purposes; 
(3) No alcoholic bevoragoa — ar e sold, no sal e s or 

ord e rs ar e Dolioit e d, — and no ord e r blank s ar e 
placed in or about tho prcmisos; 

(2) (3) If the tasting is held on the premises of a retail 
permittee, and an industry member participates, 
the industry member may purchase the products to 
be used from the retailer so long as the purchase 
price is no higher than the retailer's ordinary retail 
price; 

(3) (4) If wine or beer is furnished by the industry 
member for a consumer tasting held in conjunction 
with a retailer, any excess brought to the tasting is 
removed by the industry member; and 

(4) (5) If a tasting is conducted by an industry mem- 
ber in conjunction with a retailer, the industry 
member makes no payment to or on behalf of the 
retailer for promoting and advertising the tasting. 



Statutory Authority G.S. 18B-207; 
18B-1 109(a)(4); 18B-1116(b). 



18B- 1107(a)(4): 



(2) require the person in charge of the private func- 

tion to apply for and obtain a Limited Special 
Occasion Permit under the provisions of G.S. 
188-1001(9) and 188-902. 



Statutory Authority 
188-1001(8), (9). 



G.S. 188-207; 188-301 (c); 
SECTION .0900 - WINE AND BEER TASTINGS 



.0901 TASTINGS AND SAMPLINGS; GENERAL 

(a) "Tasting" means an educational event offered by an 
industry member, retailer or other person, structured in such 
a way that attendees are given an opportunity to taste a 
variety of malt beverage or wine products and are provided 
information on the qualities, production and history of the 
products featured in the event. 

(b) "Sampling" means the offer by a retailer to a cus- 
tomer of small amounts of malt beverage or wine products 



.0903 TASTINGS HELD BY INDUSTRY 

MEMBERS FOR RETAILERS: INDUSTRY 
SAMPLES 

(a) Samples. An industry member may give samples of 
wine or malt beverages to a retail permittee authorized to 
sell that beverage under the following circumstances: 

(1) The industry member may give the retailer up to 
three gallons per brand of malt b e v e rag e s bever- 
age product and up to three liters per brand of 
wine product ; and 

(2) The retailer has not previously purchased those 
brand s products from the industry member. 

(b) Tastings. The industry member may give the retailer 
samples by the glass of any products he offers for sale. 
Such a tasting may be conducted on the industry member's 
premises or at any other location approved by the Commis- 
sion for that purpose. A tasting under this Paragraph shall 
not be conducted in conjunction with a meal, a party, or any 
other social event but shall be for business purposes only. 



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1685 



PROPOSED RULES 



Statutory Authority G.S. 18B-207; 18B-1 107(a)(4); 
18B-1 109(a)(4); 18B-1116(b). 

.0904 RETAILER SAMPLINGS 

(a") Limitations. A retailer holding the appropriate on- 
p remise malt beverage or wine permits may provide to its 
customers samples of those products in the following 
quantities: 

(1) not more than one ounce of each wine being 
sampled; 

(2) not more than three ounces of each malt bever- 
age being sampled. 

(b) Industry participation. An industry member may 
assist a retailer in providing samples of the industry mem- 
ber's products. Such assistance may be in the form of 
providing labor and product, but the industry member shall 
not make any payment to or on behalf of the retailer for 
promoting and advertising the sampling. Any product 
supplied by the industry member that is not used in the 
sampling shall be removed from the retailer's premises. 

Statutory Authority G.S. 18B-207; 18B-1 107(a)(4); 18B- 
1109(a)(4); 18B-I116(b). 

SECTION .1000 - ADVERTISING 

.1005 PROHIBITED STATEMENTS IN 
ADVERTISESIG OR ON LABELS 

(a) General Restrictions. An advertisement or product 
label shall not contain: 

(1) any statement, design, device or representation 
that is false or misleading in any material partic- 
ular; 

(2) any statement that is disparaging of a competi- 
tor's products; 

(3) any statement, design, device or representation 
which depicts nudity or is obscene or indecent; 

(4) any statement, design, device or representation 
of or relating to analysis, standards or tests, 
irrespective of falsity, which is likely to mislead 
the consumer; 

(5) any statement, design, device or representation 
of or relating to any guaranty, irrespective of 
falsity, which is likely to mislead the consumer. 
Nothing in this Section shall prohibit the use of 
an enforceable guaranty in substantially the 
following form: "We will refund the purchase 
price to the purchaser if he is Ln any manner 
dissatisfied with the contents of this package"; 

(6) any statement that the product is produced, 
blended, made, bottled, packed or sold under or 
in accordance with any authorization, law or 
regulation of any municipality, county or state, 
federal or foreign government, unless such 
statement is required or specifically authorized 
by the laws or regulations of such government; 
and if a municipal, county, state or federal 



permit number is stated, such permit number 
shall not be accompanied by any additional 
statement relating thereto; 

(7) any statement, picture or illustration implying 
that the consumption of alcoholic beverages 
enhances athletic prowess, or any statement, 
picture or illustration referring to any known 
athlete, if such statement, picture or illustration 
implies, or if the reader may reasonably infer, 
that the use of this product contributed to such 
athlete's athletic achievements; 

(8) any picture or illustration depicting the use of 
alcoholic beverages in a scene which is undigni- 
fied, immodest or in bad taste; 

(9) any offer of a prize or award upon the comple- 
tion of any contest in which there is a require- 
ment to purchase the advertised product, pro- 
vided that however , no label or advertisement 
shall promote a gamo of ohono e gambling or a 
an illegal lottery; 

(10) any subject matter or illustrations inducing 
persons under 21 years of age to drink; 

(11) any statement, picture or illustration inconsistent 
with the spirit of safety or safe driving pro- 
grams; 

(12) any scene that would be contrary to state laws 
and rules governing sale, storage and consump- 
tion of alcoholic beverages; 

(13) any statement concerning a brand an alcoholic 
beverage product that is inconsistent with any 
statement on the labeling thereof; 

(14) any statement, design or device representing that 
the use of a brand an alcoholic beverage product 
has curative or therapeutic effects, if such 
statement is untrue in any particular, or tends to 
create a misleading impression; 

(15) any statement or representation that the product 
was manufactured in or imported from a place 
or country other than that of the actual origin, or 
was produced or processed by one who was not 
in fact the actual producer or processor; 

(16) any statement, design, device or pictorial repre- 
sentation of or relating to or capable of being 
construed as relating to the armed forces of the 
United States or the American Flag, state flag, 
or any emblem, seal, insignia or decoration 
associated with any such flag of armed forces of 
the United States; nor shall any advertisement 
contain any statement, device, design or pictorial 
representation of or concerning any flag, seal, 
coat of arms, crest or other insignia, likely to 
mislead the consumer into believing that the 
product has been endorsed, made or used by, 
produced for or under the supervision of or in 
accordance with the specifications of the govern- 
ment, organizations, family or individual with 
whom the flag, seal, coat of arms, crest or 



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PROPOSED RULES 



insignia is associated; or 
(17) words such as "high test," "high proof," "full 
strength," "extra strong," or similar descriptive 
terms, or direct or indirect references to the 
intoxicating effect of the product, 
(b) Prohibited Statements in Regard to Wine. In addition 
to the applicable prohibited statements as set forth in 
Paragraph (a) of this Rule, an advertisement or label for 
wine shall not contain: 

(1) any statement of bonded winecellar and bonded 
winery numbers unless stated in direct conjunc- 
tion with the name and address of the person 
operating such winery or storeroom. Statement 
of bonded winecellar and bonded winery num- 
bers may be made in the following form: 
"Bonded Winecellar No. ," "B.W.C. No. 

■^nded Winery No. ," "B.W. No. ." 

No additional reference thereto shall be made, 
nor shall any use be made of such statement that 
may convey the impression that the wine has 
been made or matured under United States 
Government or any state government supervision 
or in accordance with United States Government 
or any state government specifications or stan- 
dards; 

(2) any statement, design or representation which 
rolatoa to alcoholic contont or which tends to 
create the impression that a wine is "unfortified" 
or has been "fortified" or has intoxicating quali- 
ties, or contains spirituous liquor (except for a 
reference to spirituous liquor in a statement of 
composition where such statement is required by 
these Rules to appear as part of the designation 
of the product); or 

(3) statement of age or dates, or any statement of 
age or representation relative to age (including 
words or devices in any brand name or trade- 
mark), except that: 

(A) In the case of vintage wine, the year of vintage 
may be stated if it appears on the label; or 

(B) Truthful references of a general and informa- 
tive nature relating to methods of production 
Involving storage or aging, such as "This wine 
has been mellowed in oak casks," "Stored in 
small barrels" or "Matured at regulated tem- 
peratures in our cellars" may be made. 

The statement of any bottling date shall not be 
deemed to be representation relative to age, if 
such statement appears without undue emphasis 

in the following form: "Bottled in " 

(inserting the year in which the wine was 
bottled). No date, except as provided in this 
Section with respect to statement of vintage 
year and bottling date, shall be stated unless, 
in addition thereto and in direct conjunction 
therewith, in the same size and kind of print- 



ing there shall be stated an explanation of the 

significance of such date. Provided, that if 

any date refers to the date of establishment of 

any business, firm or corporation such date 

shall be stated without undue emphasis and in 

direct conjunction with the name of the person, 

firm or corporation to whom it refers. 

(c) Prohibited Statements in Regard to Spirituous Liquor. 

In addition to the applicable prohibited statements in 

Paragraph (a) of this Rule, an advertisement for spirituous 

liquor shall not contain: 

(1) words "bond," "bonded," etc; any statement 
containing the words "bond," "bonded," or 
"bottled in bond," "aged in bond" or phrases 
containing these or synonymous terms, unless 
such words or phrases appear upon the labels of 
the spirituous liquor advertised, and are stated in 
the advertisement in the manner and form in 
which they appear upon the label; 

(2) statements of age; any statement, design or 
device directly or by implication concerning age 
or maturity of any brand or lot of spirituous 
liquor unless a statement of age appears on the 
labels of the advertised product; When any such 
statement, design or device concerning age or 
maturity is contained in any advertisement, it 
shall include, in direct conjunction therewith and 
with substantially equal conspicuousness, all 
parts of the statement concerning age and per- 
centages, if any, which appear on the label. 
However, an advertisement for any whiskey or 
brandy which does not bear a statement of age 
on the label, or an advertisement for rum which 
is four years or more old, may contain general 
inconspicuous age, maturity or other similar 
representation, e.g., "aged in wood," "mellowed 
in fine oak casks"; 

(3) the word "pure" except as part of the bona fide 
name of a permittee; or 

(4) the terms "double distilled," "triple distilled" or 
any other similar term. 

Statutory Authority G.S. 18B- 105(b). 

.1008 ADVERTISING OF MALT BEVERAGES AND 
WINE BY RETAILERS 

(a) Interior Advertising. 
(1) Point-of-Sale. Retail malt beverage and wine 
permittees may utilize any amount of 
point-of-sale advertising for malt beverage and 
wine products offered for sale in the establish- 
ment. TTiis advertising may be supplied by the 
industry member unless it constitutes a fixture or 
has value other than as advertising material; 
except that an industry member may give a 
retailer brand-identified items listed in 4 NCAC 
2T .0713(c) of this Chapter for use as 



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November 15, 1995 



1687 



PROPOSED RULES 



point-of-sale advertising. 

(2) Price Boards. Retail malt beverage and wine 
permittees may display inside price boards 
showing the brand product names and prices of 
malt bd'orago beverages and wino products 
wines offered for sale in the establishment. 

(3) Menus and Beverage Lists. Retail on-premise 
malt beverage and wine permittees may place on 
the menu and beverage lists the brand product 
names and prices of malt bev e rag e beverages 
and wino produoto wines offered for sale in the 
establishment. Menus and beverage lists may be 
supplied by an industry member provided the 
menu or beverage list is not printed with the 
retailer's food menu. 

(4) Retailer Advertising Specialty Items. Retailer 
advertising specialty items are items such as 
trays, coasters, mats, meal checks, paper nap- 
kins, glassware, cups, foam scrapers, back bar 
mats, thermometers and other similar items that 
bear advertising matter. Advertising specialty 
items may be provided to a retailer by an indus- 
try member as provided in 4 NCAC 2T 
.0713(b)(8) of this Chapter. 

(5) Window Displays. Retail malt beverage and 
wine permittees may arrange a reasonable num- 
ber of malt beverage or wine products in a 
window display. 

(6) Location. No point-of-sale advertising, advertis- 
ing specialty item or price board shall be dis- 
played in a manner designed or intended to 
advertise malt beverages or wine on the outside 
of the establishment. 

(7) T-shirts and Other Wearable Items . A retailer's 
employees shall not wear alcoholic beverage 
brand identified t shirts clothing or items of any 
kind while working on the retailer's licensed 
premises. 

(8) Removal of Objectionable Signs. A permittee 
shall remove any sign, display or advertisement 
in or about his licensed premises if the Commis- 
sion finds it is objectionable or contrary to 
public interest and orders its removal. 

(b) Exterior Advertising. 
(1) Outside signs on the premises. 

(A) Malt Beverages. Retail malt beverage 
permittees may display the term "beer" or 
"cold beer" or "draught beer" on a single, 
non-mechanical outside sign. The letters and 
figures on the sign shall not be more than 5 
inches in height and 2 inches apart and the 
sign shall be attached to the building on the 
licensed premises. 

(B) Wine. Retail wine permittees may display the 
term "wine permit-off premise" or "wine per 
wine mit-on premise" or a substantially equiva- 
lent term on a single non-mechanical outside 



sign. The letters and figures on the sign shall 
not be more than 5 inches in height and 2 
inches apart and the sign shall be attached to 
the building on the licensed premises. Instead 
of the sign described in this Paragraph, retail 
wine permittees primarily and substantially 
engaged in off-premise sales of wine may 
display the term "Wine Shop" or "Wine and 
Cheese" or a substantially equivalent term on 
a single non-mechanical sign. The letters and 
figures on the sign shall not be more than 18 
inches in height and the sign shall be attached 
to the building on the licensed premises. 

(C) Restriction. Nothing in this Section shall be 
construed to allow price advertising or addi- 
tional signs advertising malt beverages and 
wine on the outside of premises holding retail 
permits. Outside signs alluding to malt bever- 
ages or wine by slang descriptions such as 
"brew," "suds," "six-pack," "vino" or similar 
terms are prohibited. 

(D) Exceptions; Menus; Trade Names. The place- 
ment in a window or on the exterior of the 
retailer's building of a food menu that also 
contains a list of alcoholic beverages by brand 
and price shall not be construed as a violation 
of this Rule. Additional exceptions may be 
granted by the Commission In the case of 
corporate names or franchise trade names. 

(2) Billboards. Retail permittees shall not advertise 
malt beverage or wine products or the availabil- 
ity of alcoholic beverages by means of a bill- 
board or outdoor sign except as provided in this 
Section. 

(3) Aerial Displays. Retail permittees shall not 
advertise malt beverage or wine products or the 
availability of alcoholic beverages by means of 
an aerial display or an inflatable item that is 
tethered. 

(c) Removal of Objectionable Signs. A permittee shall 
remove any sign, display, or advertisement in or about his 
Ucensed premises if the Commission finds it is objectionable 
or contrary to public interest and orders its removal. 

(d) Media Advertising. A retail malt beverage or wine 
permittee may advertise price and brand product name of 
malt b e v e rag e beverages and win e produoto wines offered 
for sale by means of circular, newspaper, magazine, radio 
and television. 

Statutory Authority G.S. 18B-105(b). 

.1011 ADVERTISING OF SPIRITUOUS LIQUORS 

(a) ABC Stores. An ABC store may have one or more 
outside signs locat e d on th e pr e mis e s for the purpose of 
identifying the outlet if the sign is not prohibited by local 
ordinance and it has been approved by the Commission. A 
local board that desires to place an identifying sign off its 



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PROPOSED RULES 



property must submit to the Commission the following items 
with a request for approval: 

(1) Statement of necessity for the sign; 

(2) Description of the sign, to include size, height. 
and size of letters, and the message; and 

(3) Description of location of sign and its relation to 
the ABC store it seeks to identify. 

Signs may contain directional markings such as arrows, and 
may give estimated distance to store and may state "ABC 

Store" or " County ABC Store", but shall not 

contain symbols such as bottles or glassware. No billboard 
advertisement shall be purchased by a local board that 
announces the location of a store or stores along the 
highways or roads of the State. 

(b) Aerial Displays. No distiller, importer, or rectifier of 
spirituous liquor, or representative thereof, nor any retail 
permittee, shall advertise by means of an aerial display or 
inflatable the brand name or availability of spirituous liquor. 

(c) Billboards. No distiller, importer, or rectifier of 
spirituous liquor, or representative thereof, nor any retail 
permittee, shall advertise by means of a billboard or sign the 
brand name or availability of spirituous liquor. 

(d) Broadcasting. No retail permittee shall advertise by 
radio or television or any transmission to radio or television 
the brand name or availability of spirituous liquor. 

(e) Point-of-Sale. Point-of-sale and advertising specialties 
for spirituous liquor may be used in ABC stores but not in 
retail establishments holding permits issued by the Commis- 
sion. Advertising used in ABC stores shall conform to the 
provisions of Rule .1005 of this Section, and in addition 
shall not: 

(1) incorporate the use of any present or former 
athlete or athletic team; 

(2) refer to the availability of or offer any alcoholic 
beverages by mail; or 

(3) utilize case card loaders. 

All point of salo advortising material, advertising spocialtios, 
and r a oip e o, bookl e t s or brochur e s int e nd e d for us e and 
display in ABC ator e o shall fir s t bo submitted to the Com 
mission for approval prior to their display in an ABC s tore. 

Statutory Authority G.S. 18B-105. 



(3) A refund may be offered only when the redemp- 
tion form is part of or attached to a package or 
container of malt beverages, or when the re- 
demption form is available on a tear pad at the 
point of purchase. Any refund offer that is 
attached to the package shall be placed there by 
the non-resident vendor or manufacturer, or the 
wholesaler of the non-resident vendor or manu- 
facturer who offers the refund. 

(4) A refund offer shall apply throughout the state. 

(5) A refund offer shall include an expiration date. 

(6) A refund offer shall explain the redemption 
procedure and specify the expiration date and 
length of time before the refund js sent to the 
purchaser. Refund offers shall be redeemed by 
either mailing or sending the redemption form to 
the non-resident vendor or manufacturer who 
offers the refund or its designated redemption 
agent. The redemption agent shall not be a 
retail or wholesale permittee. 

(c) Commercial Bribery; Cooperative Advertising. No 
retailer or employee of a retailer shall accept and no 
industry member shall pay any fee for the display or use of 
refund offers. A retailer's name shall not appear on any 
refund offer- 
ed) Advertising Refund Offers. Refund offers may be 
advertised by newspapers, magazines or direct mail, but no 
redemption form may appear in such advertisements. 

(e) Redemption of Refund Offer by Retailers. No retailer 
or employ ee of a retailer may redeem a refund offer without 
first making a retail purchase of the brand for which the 
refund is offered. 

Statutory Authority G.S. 18B-105(h). 

SUBCHAPTER 2T - INDUSTRY MEMBERS: 

RETAIL/INDUSTRY MEMBER RELATIONSHIPS: 

SHIP CHANDLERS: AIR CARRIERS: FUEL 

ALCOHOL 

SECTION .0100 - DEFINITIONS: APPLICATION 
PROCEDURES 



.1021 REFUND OFFERS; MALT BEVERAGES 

(a) General. Refund offers may be used to advertise malt 
beverages. 

£b} Conditions. A reftind offer is an offer to a consumer 
for a rebate of money or merchandise, other than alcoholic 
beverages, from a non-resident vendor or manufacturer of 
malt beverages. Refund offers are allowed subject to the 
following conditions: 

(1) A refund may be offered only on purchases of a 
manufacturer's original unopened packages or 
containers of malt beverages from a retailer with 
a malt beverage permit. 

(2) A refund may be offered only by a non-resident 
vendor or a manufacturer of malt beverages. 



.0101 DEFINITIONS 

The following terms shall have the following meanings 
when used in this Chapter: 

(1) "Brand," in relation to wines, means the name 
under which a wine is produced and shall include 
trade names or trademarks. A brand shall not be 
construed to mean a class or type of wine, but all 
classes and types of wines sold under the same 
brand label shall be considered a single brand. 
Differences in packaging such as a different style, 
tyjje or size of container are not considered differ- 
ent brands. 

(2) "Industry member" means any wholesaler, sales- 
man, brewery, winery, bottler, importer, distiller. 



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1689 



PROPOSED RULES 



rectifier, nonresident vendor, vendor representa- 
tive, or affiliate thereof, that sells or solicits 
orders for alcoholic beverages, whether or not 
licensed in this state. 

(3) "Retail permittee" or "retailer" means any permit- 
tee holding a retail alcoholic beverage permit 
issued pursuant to the authority of G.S. ISB-lOOl, 
but shall not include a non-profit or political 
organization that has been issued a Special 
One-Time permit pursuant to the provisions of 
G.S. 18B- 1002(a)(2) or (5). 

(4) "Representative" means any vendor representative, 
as that term is defined in G. S. 18B-1 1 12, or any 
other person selling or soliciting orders for alco- 
holic beverages on behalf of a manufacturer, 
bottler, vendor, or importer. 

(5) "Vendor" means any nonresident malt beverage 
vendor or nonresident wine vendor, as those terms 
are defined in G.S. 18B-1113 and 18B-1114. 

(6) "Wine" means both fortified wine and unfortified 
wine, as those terms are defined in G.S. 
18B-101(7) and (15). 

(7) "Supplier" means a brewery, winery, nonresident 
vendor, importer, or bottler, as those terms are 
defined in Article 1 1 of Chapter 18B of the Gen- 
eral Statutes. 

Statutory Authority G.S. 18B-101; 18B-207; 1 88-1101 
through 18B-1104; 183-1107; 18B-1108; 18B-1110; 18B- 
1112 through 18B-1114. 

.0102 APPLICATION PROCEDURES 

(a) Before any winery, brewery, distiller, wholesaler, 
importer, bottler, representative, distiller representative, 
salesman, or vendor sells, solicits orders for, or manufac- 
tures, bottles or imports any alcoholic beverage in this State, 
that person shall first file written application for the appro- 
priate permit and pay the required fees, as described in G.S. 
18B-902. 

(b) Who Files. Application for permits shall be filed by 
those individuals listed in G.S. 18B-900(c). Each person 
shall provide in the application, under oath, the following 
information: 

(1) name, address, and residence of applicant; 

address of location of business for which permit 
is desired, and county and state in which busi- 
ness is located; 

corporato corporate, company or partnership 
name; 

trade name of business; 
name and address of owner of premises; 
applicant's date and place of birth; 
if a corporation, limited liability company or 
limited partnership, the name and address of the 
registered agent or e mploy ee authorized to serve 
as process agent; 

(8) if a nonresident, intending to operate a business 



(2) 



(3) 

(4) 
(5) 
(6) 
(7) 



in the State of North Carolina, the name and 
address of person appointed as attorney-in-fact 
by virtue of a duly executed and registered 
power of attorney; and 
(9) if the application is for a vendor representative 
permit, authorization from the commercial 
permittee to represent it. 
In addition the applicant shall certify, under oath, that he 
has not been convicted of a felony within three years, an 
alcohol or drug law violation within two years, nor had any 
permit authorizing the sale, importation or manufacture of 
alcoholic beverages revoked by this State, any other state, 
or the federal government revoked within the past three 
years. 

(c) Salesmen, Representatives, Vendors To State Compa- 
nies. All salesmen, representatives, distiller representatives, 
and vendors shall further state on the permit application the 
name of every manufacturer, importer, wholesaler, or 
vendor that the applicant wiU represent in the State of North 
Carolina. 

(d) Resident Wholesalers. In addition to the requirements 
set forth in Paragraphs (a) and (b) of this Rule, every 
applicant for a permit to sell malt beverages or wine at 
wholesale shall submit with the f)ermit application a distribu 
ti©B — agroomont the designations(s) from its suppliers 
specifying the brands authorized to be sold by the whole- 
saler and the specific territory in which the product may be 
sold. 

Statutory Authority G.S. 18B-207; 18B-900; 18B-902; 
18B-1109(b); 18B-1200 through 18B-1216; 18B-1303(a). 

SECTION .0200 - PRODUCT APPROVALS: 
LISTING PROCEDURES: PRODUCT LISTS 

.0201 MALT BEVERAGE AND WEVE PRODUCT 
APPROVALS: LISTING IN STATE 

(a) All malt beverage and wine products offered for sale 
by an industry member shall first be approved by the 
Commission. Thereafter, any approved malt bovorago 
product sold in this State shall conform to the analysis of 
the oampl e o s ubmitted product . 

(b) Sampl e s. — Any industry m e mber who submits to 
th e Commission a molt b e v e rag e product for approval for 
sal e in th e Stat e shall furnish, without oost to th e Com 
mission, a sample of the product in a mark e tabl e oon 
tain e r. Responsibility for Approval. Responsibility for 
obtaining product and label approval is upon the vendor, 
winery, brewery, bottler or importer seeking authority to 
sell its products in this state. 

(c) Procedure for Listing. To receive consideration by 
the Commission for a new malt beverage or wine 
product, an industry member shall submit appropriate 
label or product information on forms approved by the 
Commission and shall comply with the following proce- 
dures: 

(1) All itoms Label Approval forms shall be submit- 



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ted in duplicate with a list of all container sizes 
being offered; 

(2) Att Original labels for each size container, 
including all labels that will appear on the 
container, shall be submitted in duplicate and 
attached to the application Label Approval form; 

(3) A copy of the Federal Label Approval Form 
shall be submitted for each set of labels ; 

(4) Payment of a non refundable analysis foo in the 
amount of tsvonty fiv e dollars ($25.00) s hall 
aooompany — tho application of oaoh n e w it e m 
submitted; oxcopt if the industr)' member sub 
mits a cortifiod laboratory analysis of tho prod 
uot, payment of a non r e fundabl e administrativ e 
foo in tho amount of t e n dollars ($10.00) shall b e 
submitted. 

fd) If on An analysis of a each product is submitted it 
which shall provide at least th e following information in 
English a certified statement of the alcohol content by 
volume, accompanied by a check in the amount of $10.00 
for each analysis submitted . 

fi) alcohol by volum e (maximum s ix perc e nt), 
(3) total — sulphur dioxid e content (maximum 25 

ppm), 
(^ gallo tannins (maximum 100 ppm), 
f4) oalori e s p e r 360 millilit e rs (12 ounc e s), and 

(5) spocifio gravit)'. If no product analysis is avail- 
able for submission, the applicant shall submit 
two samples of the product in marketable con- 
tainers. The applicant shall pay the costs of any 
tests required, and will be notified of such costs. 
No analysis or approval of any product will be 
provided until the Commission has received the 
appropriate fees associated with the tests re- 
quired for that product. 

(6) For fortified wine, a certified statement of the 
identity and quantity of any added brandy shall 
be included in the analysis. Note: Upon request 
by the Commission, the applicant shall submit a 
sample of at least 500 milliliters of any brandy 
used to fortify a wine product being submitted 
for approval as a fortified wine. 

(7) No product or label will be approved unless a 
territorial designation has been filed by the 
supplier of that product pursuant to G.S. 18B- 
1203(a) or 18B-1303(a), if the supplier is subject 
to the requirements of either Article 12 or 
Article 13 of Chapter 18B of the General Stat- 
utes. 

(d) {p) All forms required for tho listing, analysis and 
approval of any malt b e v e rag e product or label approval 
shall be stapled together and forwarded to the ABC Com- 
mission, Product Compliance Division, 3322 Gamer Road 
(zip 27610) , P.O. Box 26687, Raleigh, North Carolina 
27611-6687. 

Statutory Authority G.S. 18B-203(a)(5): I8B-206; 188-207; 



18B-1203(a); 18B-1303(a). 

.0202 WINE APPROVALS: LISTING IN STATE 

(a) — Except as provided for special orders, before any 
wine is offered for sale in thi s State, it and the label used 
upon th e container shall first be approv e d by tho Commio 
oion. Th e Commisoion shall provid e blank Win e Analyoin 
forms upon request. — Ther e after, any approved wine sold 
s hall conform to the analy s is of tho s ample s submitted. 

(b) Sample of Win e R e quired. — i\n indu s try m e mb e r shall 
submit, without cost to th e Commission, a sampl e of any 
wine that is tho subject of application for listing for inspcc 
tion and analysi s . 

fe) — Th e s t e ps r e quir e d to r e c e iv e consid e ration by th e 
Commisoion for a new win e listing ar e : 

fB submit all items on tho form in duplicate, forti 

fied and unfortified wines listed on s eparate 

{3^ submit all lab e l s in duplicat e attach e d to th e 

form; 
{^ submit a 5(X) milliliter (or a larger size if 500 

milliliter is not available) bottle of each product 

offered for examination; 

f4) list all s izes being offered on the form; 

f5) s ubmit a copy of the Federal Label Approval; 

(6) submit a ch e ck in th e amount of tw e nty fiv e 

dollars ($25.00) for e ach n e w it e m submitt e d, 

oxcopt if a verified laboratory' analysis of tho 

product is submitted, a chock in tho amount of 

t e n dollars ($10.00); 
f?^ staple tog e th e r all forms submitted with e ach 

item and forv i ard to the North Carolina Alco 

holic — Beverage — Control — Commission, — 3322 

Gam e r Road, P.O. Box 26687, Ral e igh, North 

Carolina 27611 66 8 7. 
fd) — If an analysi s of a product is submitted, it shall 
provide at lea s t the following information in English: 

f4^ alcohol by volum e (p e rc e nt); 

(3) total acidity (g/100 cc as tartaric acid); 

(^) total sulphur dioxide content (ppm); 

(4) volatile acidity, exclusive of sulphur dioxide 

(g/100 oc as acetic acid); 
(4) alcohol fr ee — s olubl e solids (d e gre e s/Brix — de- 

groos/Balling); and 
(4) identity and quantity of any added chemical 

pr e s e rvativ e . 



Statutory Authority G.S. 188-203 (a)(5): 18B-206: 18B-207. 

.0206 NEW FILING REQUIRED UPON TRANSFER 
OF BRAND 

When any malt beverage or wine brand or product is 
transferred from one nonresident vendor, manufacturer or 
importer to another, the new vendor, manufacturer or 
importer shall, within 30 days of the acquisition of the 
brand or product, submit the following items to the Com- 
mission the following items for each product: 



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(1) label approval application formg (BWL008) form 
in duplicate, with all original labels for all sizes 
attached; 

(2) copieo a copy of the Federal Label Approval 
formg in duplicato form ; 

(3) if no analysis is on file with the Commission, a 
certified laboratory analysis of the product, in 
Enghsh, showing alcohol content by volume, with 
a check in the amount of ten dollars ($10.00); and 

(4) the wholesaler territorial designations for the 
brand and product that were in effect on the date 
the product was acquired by the vendor, manufac- 
turer or importer. 

Comphance with this Rule is mandatory notwithstanding the 
fact that the product has been previously approved by the 
Commission. 

Statutory Authority G.S. 18B-203(a); 18B-206; 18B-1203; 
18B-1303(a); 18B-1305(d). 

SECTION .0300 - PACKAGING AND LABELING OF 
MALT BEVERAGES AND WINE 

.0301 PACKAGING REQUIREMENTS 

No wine or malt beverages shall be sold, sold or offered 
for sale cal e , or poooooo e d for th e purpos e of sal e in this 
State unless: 

(1) The alcoholic beverage product is packaged, 
marked, branded, sealed and labeled in conformity 
with these Rules; and 

(2) The label on each product truthfully describes the 
contents of the container in accordance with 
standards of identity, and the industry member 
responsible for labeling or product approval 
furnishes the Commission with adequate proof that 
a valid certificate of label approval for the label 
has been obtained from the Bureau of Alcohol, 
Tobacco and Firearms, U.S. Treasury Depart- 
ment; 

(3) The product has been approved for sale in this 
State. 

Statutory Authority G. S. 18B-206(a); 18B-207. 

.0302 LABELS TO BE SUBMITTED TO 
COMMISSION 

(a) All lab e l s for malt b e v e rag e and win e products shall 
bo submitted in duplicate to tho Commission on an "Appli 
cation for Label Approval Form. " 

(b) Each p e rson r e qu e sting lab e l approval shall fumich. 
in th e application for lab e l approval, th e names and ad 
drosses of tho manufacturer, bottler and importer of tho 
product. 

Statutory Authority G.S. ]8B-206(a); 18B-207. 

.0303 LABEL CONTENTS 



Malt beverage and wine labels shall contain the following 
information in a legible form: 

(1) Brand name of product; 

(2) Name and address of browor or bottler; manufac- 
turer or bottler, or name and address of importer 
if product is imported into the United States; 

(3) Class or type of product (e.g., boor, alo. porter, 
lager, bock, stout, or other brewed or ferm eflted- 
beverage) ; and 

(4) Net Cont e nts, contents, except that no net contents 
need appear on the label if it is blown, branded or 
burned in the container. 

Statutory Authority G.S. 18B-206(a); 18B-207. 

.0304 RETAILER PRIVATE LABELS 

(a) — All wine labols shall contain tho following inform a- 
tion, in a l e gibl e form: 

(4^ brand nam e of product; 

(3) class and t^Tpo, in conformity with Section .0 4 00 

of this Subchapter; 

(3) nam e and address of manufactur e r, or bottler, 

e xc e pt as othorv ^ 'is e provided in those Rules; 

(4) on blonds consisting of foreign and domestic 

wine, if any roforonco is mndo to the presence of 
for e ign win e , th e e xact f> e ro e ntag e by volume of 
th e foreign win e ; and 
(5) net contents (unless blown or oth e rsvise perm a- 
nently inscribed in tho container), 
(b) Exc e ption for R e tail e r's Private Brand. In the case of 
wine bottles or malt beverage containers packaged for a 
retailer or other person under his private brand, the name 
and address of the bottler bottler, manufacturer, or importer 
need not be stated on the brand main product label but may 
be stated on another label affixed to the container, if the 
name and address of the person for whom bottled or packed 
appears on the main label. The net contents shall be stated 
on the brand label or on a separate label affixed in immedi- 
ate proximity thereto on the same side of the container in 
readily legible form, unless blown or otherwise permanently 
inscribed in the container. 

fe) — Import e d Win e s. — Th e nam e and addr e ss of th e 
import e r of a for e ign wine need not b e stated on th e brand 
label if it is stated upon another labol affixed to tho con 
tninor. 

Statutory Authority G.S. 18B-206(a); 18A-207. 

.0305 ALL CONTAINERS TO HAVE LABEL 

(a) General Requirement. Every container of wine or 
malt beverages, including bottles, barrels, casks, kegs, cans 
or other closed receptacles, irrespective of size or of the 
material from which made, that is sold or offered for sale 
in this State or that is used for the transportation, importa- 
tion or sale of malt beverages or wine shall bear a brand 
product label (or a brand label and other permitted labels) 
labels containing the information required by Rules .0303 



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and .030 1 Rule .0303 of this Section. 

(b) Serving Tanks. A keg or serving tank from which 
malt beverages are dispensed through a tag into glasses or 
pitchers for sale to the public at a brewpub need not contain 
the information required by Rule .0303 of this Section, but 
shall bear the health warning statement prescribed by 27 
C.F.R. Part 16. 

(c) Closed Take-Out Containers. A closed take-out 
container or "growler" used at a brew-pub as a container for 
malt beverages shall be labeled to show the product name, 
class or type, and manufacturer's name. TTiis information 
may appear m any legible format and need not be submitted 
to the Commission for approval. 

Statutory Authority G.S. 18B-206(a); 18B-207; 27 C.F.R. 
Part 16. 

.0308 LABEL REVISIONS 

Revisions in the following items on a label shall require 
the supplier to submit the revised labels to the Commission 
on a Label Approval Form as prescribed in Rule .0201 of 
the Subchapter: 

(1) Change in manufacturer or importer; 

(2) Change in statement of class or type; 

(3) Change in net contents; or 

(4) Changes to the design or in the graphics of any 
part of a label. 

Statutory Authority: G.S. 18B-203 (a)(5); 18B-206(a); 18B- 
207. 

.0309 CONTAINERS FOR WINE 

The sale of wine in any unsealed container or in any 
container originally designed for a product other than wine, 
the design or shape of which would tend to mislead the 
consumer as to the nature of the contents, is prohibited. All 
wine containers shall be made of glass or other nonmetallic 
materials except for bulk on-premises containers approved 
by the Commission. 

Statutory Authority G. S. 18B-206; 18B-207. 

SECTION .0400 - STANDARDS OF IDENTFTY FOR 
WINE: CONTAINERS 

.0409 PROHIBFTED PRACTICES 

(a) Th e production, importation or s al e within thi s Stat e 
of any product as or undor the designation of wino that fails 
to conform to tho stnndnrda proscribed in tho s e RuIo b , or of 
any imitat i on or oubstimdard win e is prohibit e d. 
fb) — Imitation Win e . — Imitation win e includ e a: 

fH any wino containing synthetic materials; 

(3^ any wino made from a mixture of water with 

residu e s remaining aft e r thorough pr e ssing of 
grapes, fruit or other agricultural products; 

0) any class or typo of wino, tho tasto, aroma, 

color or other chamctoristics of which have been 



<^ 



acquired in whole or in part by treatment with 
m e thod s or materials of any kind, if tho tasto, 
aroma, color or oth e r oharaoteristioo of normal 
winos of any such class or typo are acquired 
without that treatment; or 
any win e made from must oonoontrat e d at any 



tim e to mor e than 8 d e gr ee s (Balling). 
Substandard wino includes: 



fH any wine having a volatile acidity in excess of 

th e maximum prescribed th e r e for in thooo Rules; 

(3) any win e for which no maximum volatil e acidity 

is proscribed in those Rules having a volatile 
aoidit)', calculated as acetic acid and exclusive of 
sulphur dioxid e , in e xc e ss of 0. H gram per 100 
oubio c e ntim e t e rs (20 d e grooo C e ntigrade); 

(3-) any wine for which a s tandard of identity is 

proscribed in tho s e Rules that through disease, 
d e composition or oth e rwis e fails to hav e th e 
composition, color and cl e an vinous ta s te and 
aroma of normal — wino s — conforming — to that 
standard; 

(4) win e of any class or t>qj e containing add e d water 

or a sugar and wat e r solution in e xc e ss of th e 
quantities expre s sly authorized for standard wino 
made from the s ame kind or kinds of materials 
a s pr e scrib e d in these Rules; 

(#) any win e containing monoohlorao e tic acid or any 

other substance or prosor i 'ative prohibited by tho 
United States Food and Drug Administration or 
th e F e d e ral Alcoholic Tax Unit; or 

(6^ any win e containing d e l e t e rious, — harmful or 

impure substances or elements or an improper 
balance of elements. 
fd^ — Coined Nam es 

(4-) Mixtur e of Win e s. — Th e sal e in this Stat e of 

winos identified on labels or in adverti s ement s 
by a type or brand designat i on that implies 
mixtur e s of wine s for which s tandards of id e ntity 
ar e e stablish e d in th e s e Rules, or which id o ntily^ 
ing type or brand de s ignation — resembles on 
established wine typ>e name such as "Angelica," 
"Mad e ira," "Muscat e l," "Claret," "Burgundy," 
etc., is prohibit e d. 
Combinations of Alcoholic Beverages. — The sale 



(3^ 



in thi s State of wines or combination s of wino 
and other alcoholic b e v e mg e s that contain on the 
lab e ls stat e m e nts such as "whisk e y wino," "rum 
and wine," "gin and win e ." "boor and wino" or 
similar combinations is prohibited. 

Statutory Authority G.S. 18B-206(a): 18B-207. 

.0410 CONTAINERS 

(a) Unseal e d Contain e r Prohibit e d. — Th e s al e of win e in 
any uns e aled contain e r or any contain e r originally d es ign e d 
for a product other than win o or in any container tho design 
or s hape of which would tend to mislead the consumer as to 



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1693 



PROPOSED RULES 



tho rmturo of tho contonta 13 prohibitod. — All wino contmnors 
ohall b e mad e of glaoo or oth e r nonm e tallio mat e riala e xc e pt 
for bulk on promio e o oontain e ro approv e d by the Commit) 

fb) — Diattnguiahing Mark Difforont from Rotnilor. — The 
oalo of win e in oontain e rs that have th e blown, brand e d or 
bumod nam e or other diotinguiohing mark of any p e rson 
engag e d in businoaa aa a wino produoor, importor, whole 
salor or bottlor or any other p>oraon different from tho 
fwrson whos e name io requir e d to appv e ar on th e brand lab e l 
is prohibit e d. 

Statutory Authority G.S. 18B-206; 18B-207. 

.0411 SEIZURE OF SUBSTANDARD WINE 

Imitation, aubatondard or miabrandod wino offered for sale 
in violation of the i\BC laws may bo aeized and disf>oacd of. 

Statutory Authority G.S. 18B-206(a); 18B-207; 18B-503. 

SECTION .0500 - INDUSTRY MEMBERS: 
GENERAL PROVISIONS 

.0502 RECORD KEEPING REQUIREMENTS: 
SALES TICKETS 

(a) In addition to records required to be kept by the North 
Carolina Department of Revenue, all industry members shall 
maintain on the licensed premises a copy of every original 
sales ticket or receipt that relates to sales of alcoholic 
beverage products, equipm e nt, accessories, advertising 
specialty items, or advertising novelties. 

(b) Sales Ticket Required. Wholesalers or their salesmen 
shall, at the time of each sale and delivery of malt beverages 
or wine to a retailer, provide on every retail sales ticket the 
following information: 

(1) date of sale; 

(2) name of establishment; 

(3) location; 

(4) quantity of each brand of malt beveragoa bever- 
age or wine product sold; 

(5) unit price; 

(6) total price; 

(7) amount received; 

(8) invoice number; and 

(9) route, if applicable. 

All sales tickets shall be endorsed at the time of sale by the 
retailer or authorized agent and by the wholesaler with the 
usual signature of each. 

All sales tickets shall be retained by the wholesaler for a 
period of three years and shall be filed alphabetically, by 
sales route, or chronologically by date of sale. 



.0601 APPROVED PRODUCTS ONLY 

Except as provided in Subchapter 2S,, Rule .0223, no 
wholesaler shall sell any product that has not been approved 
by the Commission for sale in this State. It is a whole- 
saler's responsibility to determine whether or not a product 
has been approved by the Commission before it sells or 
offers for sale any alcoholic beverage. 

Statutory Authority G.S. 18B-207; 18B-1005. 

.0602 SALES AND PURCHASE RESTRICTIONS: 
RECORDS 

(a) No wholesaler of malt beverages shall sell malt 
beverages to any person who does not hold a retail or 
wholesale Malt Beverage permit, and no wholesaler of wine 
shall sell any fortified wine or unfortified wine to any 
person who does not hold the appropriate retail or wholesale 
Fortified or Unfortified Wine P e rmit; e xc e pt. Permit, 
Culinary Permit or Ship Chandler's Permit, except that a 
wholesaler may fiimish or sell wine or malt beverages to his 
employees for the sole use of the employees. 

(b) No retail malt beverage or wine permittee shall 
purchase those alcoholic beverages from anyone other than 
a licensed wholesaler. 

(c) No malt beverage wholesaler shall sell, ship, or 
distribute any brand of malt beverages to any retail permit- 
tee located outside the territory described in that whole- 
saler's distribution agreement for the product filed pursuant 
to G.S. 18B-1303(a). 

(d) All persons holding retail Malt Beverage or Wine 
Permits shall keep the sales tickets and delivery receipts 
furnished by the wholesaler, pursuant to Rule .0502 of this 
Subchapter, as well as all other records of purchases of malt 
beverages and wine, filed separate and apart from all other 
records. Delivery receipts shall set forth terms of sale for 
each separate transaction between the retailer and the 
wholesaler and shall include for each separate sale: 

(1) date of sale; 

(2) trade name of retail establishment; 

(3) location; 

(4) quantity of each brand of alcoholic beverage 
sold; 

(5) unit price; 

(6) total price; 

(7) amount paid; and 

(8) invoice or receipt number. 

(e) The retailer shall retain for inspection copies of all 
tickets and receipts on the premises for three years. 

(f) A retail permittee who op)erates multiple locations may 
maintain beer and wine invoices at one central location upon 
written application to and approval by the Commission. 



Statutory Authority G. S. 18B-207. 

SECTION .0600 - SALES AND DELIVERIES OF 
MALT BEVERAGES AND WENE 



Statutory Authority G.S. 18B-207; 18B-1107; 18B-1109; 
18B-1303(a). 

.0604 COLLECTION OF AMOUNT OF SALE 

(a) Each wholesaler shall collect the full amount of the 



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PROPOSED RULES 



sale price in cash or bona fide check at the time of or prior 
to delivery of alcoholic beverages to a retailer except as 
provided in this Rule. No wholesaler shall extend credit for 
any period of time to any retailer who purchases malt 
beverages or wine from him. 

Note: For purposes of this Section, the term "check" shall 
include the electronic transfer of funds from a retailer to a 
wholesaler. Prior to an electronic fiind transfer, the retailer 
shall enter into a written agreement with the wholesaler 
specifying the terms and conditions for the electronic fiind 
transfer as payment for alcoholic beverages. All such 
agreements shall provide that the wholesaler may initiate the 
electronic fund transfer at any time after delivery of alco- 
holic beverages. The electronic fund transfer must be 
initiated before the end of the business day following 
delivery. Any agreement authorizing electronic fund 
transfers shall be voluntary on the part of all parties. The 
wholesaler may not bear any share of the retailer's cost 
related to electronic fund transfers, including costs of 
information generated by third parties related to such 
transfers. Nothing in this Rule shall operate to suspend any 
of the requirements concerning sales tickets and record 
keeping as provided in Rule .0502 of this Subchapter. 

(b) Collections for sales and deliveries upon military 
reservations, however, shall not be required at the time of 
the transaction. 

(c) A route salesman may accept one payment for all 
deliveries made by him on the same day to the same 
permittee if deliveries are made to two or more of the 
permittee's retail premises on the same route. Payment in 
such cases shall be collected by the salesman for all such 
deliveries no later than at the last store account on the route. 
Nothing in this Rule shall be construed to authorize a route 
salesman to collect payment from a permittee at an office 
location unless the office is located on the premises where 
a delivery is made. 

Statutory Authority G.S. 18B-207; 18B-1116. 

.0606 PLATFORM SALES 

Wholesalers may sell malt beverages or wine to any 
person holding the appropriate retail permits at the whole- 
saler's place of business except that no malt beverages may 
be sold to any retailer whose business is located outside the 
wholeslaer's territory for the brands being sold. Such a 
transaction shall be known as a platform sale. 

Statutory Authority G.S. 18B-207. 

SECTION .0700 - ALCOHOLIC BEVERAGES: 

RETAILER/INDUSTRY MEMBER 

RELATIONSHIP: TRADE PRACTICES 

.0707 INDUCEMENTS (TIED HOUSE) 

No industry member s hall shall, either directly or indi- 
rectly : 
(1) acquire or hold any interest in any license or 



permit with respect to the premises of a retail 
permittee; 

(2) acquire any interest in real or personal property 
owned, occupied, or used by a retail permittee in 
the conduct of his business; 

(3) furnish, give, rent, lend, or sell to a retail permit- 
tee any equipment, fixtures, signs, supplies, 
money, services, or other things of value except 
as otherwise provided in these Rules; 

(4) pay or credit a retail permittee for any advertising, 
display, or distribution service; 

(5) guarantee any loan or the repayment of any 
financial obligation of a retail permittee; 

(6) extend credit to a retail permittee, except as 
otherwise provided in these Rules; 

(7) require a retail permittee to take and dispose of a 
certain quota of any alcoholic beverages; 

(8) acquire any interest in a mortgage or deed of trust 
on the retailer's business or property; 

(9) pay for the display of advertising on any signs or 
scorecards manufactured by a third party for a 
retailer; 

(10) furnish free warehousing by delaying delivery of 
alcoholic beverage product or by providing rofrig 
orated vehicles for a retailer; or 

(11) purchase advertising on signs, scoreboards and 
programs at ballparks, racetracks, and coliseums 
from the retail concessionaire, unless the retailer 
is a city or county, and an exemption has been 
granted pursuant to G.S. 18B-11 16(b). 

Statutory Authority G.S. 183-207; 18B-11 16(a). 

.0708 COMMERCIAL BRIBERY 

(a) No industry member shall mak e ooorot provide, either 
directly or indirectly, gifts or payoffs to purchasing agents, 
clerks, bartenders, salesmen or other employees of retail 
permittees. 

(b) No industry member shall give give, either directly or 
indirectly, any bonus, premium or compensation to any 
retailer or an officer, employee or agent of the retailer. 
Prohibited acts include: 

(1) monetary inducements ("push money") given to 
retailers or their employees; 

(2) total or partial payment of a retailer's em- 
ployee's salary; 

(3) sales or advertising promotion contests in which 
a retailer's employees are offered or awarded 
prizes, such as trips abroad, cash, or automo- 
biles that are totally or partially financed by an 
industry member; 

(4) payments or gratuities to groups or associations 
of retailer's employees; 

(5) other gifts such as trips, appliances, or other 
items given to retail corporate officers; or 

(6) participation in a retailer's sales or management 
meetings, conventions or outings by sponsoring 



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1695 



PROPOSED RULES 



or underwriting any events in connection with 
the meeting, convention or outing, unless such 
participation is limited to the providing of a 
hospitality suite with light hors d'oeuvres and 
beverages, and the price paid for the suite is not 
greater than that paid by any other participant in 
the meeting, convention or outing. 

Statutory Authority G.S. 18B-207; 18B-U16(a). 

.0709 CONSIGNMENT SALES: CONDITIONAL 
SALES: RETURNS 

(a) Consignment Sales Prohibited. No industry member 
shall sell, offer for sale, or contract to sell to any retail 
permittee, nor shall any retail permittee purchase, offer to 
purchase, or contract to purchase from any industry member 
any alcoholic beverages on consignment or under conditional 
sale, or with the privilege of return, or on any basis other 
than a bona fide cash sale. For the purposes of this Rule, 
a consignment sale is any transaction in which title to the 
merchandise is not transferred at the time of shipment or 
delivery and which does not involve some form of full cash 
settlement. No industry member shall contract or agree 
with a retailer to retain title to alcoholic beverages until 
those products are sold. 

(b) Privilege of Return. No industry member and retailer 
shall enter into any agreement whereby the retailer has an 
expressed or implied right to return alcoholic beverages that 
he cannot sell. Any acceptance of returned merchandise 
will be considered a strong indication that the "privilege of 
return" existed at the time of sale, and a repeated practice 
of accepting returned merchandise from a retailer would 
establish an implied privilege of return, even though no 
formal agreement has been made. 

(c) Sales Conditioned on the Acquisition of Other Mer- 
chandise. No industry member shall make any agreement 
with any retailer to accept as an agreement incident to 
present or future sales other alcoholic beverages that the 
retailer wants to remove from his inventory. The exchange 
of alcoholic beverages for equal quantities of the same type 
and brand product in containers of another size and style is 
not considered an acquisition of "other" alcoholic beverages 
and, therefore, is not prohibited where the return is other- 
wise permissible. 

(d) Exceptions. This Rule shall not apply to the follow- 
ing transactions: 

(1) returns of malt beverages or wine for ordinary 
and usual commercial reasons arising after the 
alcoholic beverages have been sold, such as 
mutilated or damaged labels or containers, error 
in delivery, product deterioration, or a bona fide 
discontinuance of the retailer's business; 

(2) exchanges of malt beverage products for equal 
quantities of the same brand, typ e , product, in 
identical size and container style, so long as the 
manufacturer's code date on the products will 
expire within 14 calendar days of the date of 



exchange, and the quantity exchanged does not 
exceed 20 cases of each brand per 14 day pe- 
riod. For the purposes of this Rule, the term 
"exchange" means to replace product for product 
and does not authorize the wholesaler to accept 
returned malt beverage products for cash or 
credit; 
(3) returns of wine or malt beverage products from 

a seasonal retailer who is open only a portion of 
the year if the products are likely to spoil during 
the off-season. For purposes of this Rule, a 
"seasonal retailer" is defined as one that closes 
its business completely for a period of at least 
eight weeks during the summer or winter 
months. Returns from a seasonal retailer may be 
for cash or credit. 
Note: The return or exchange of wine products is governed 
by this Rule and the regulations under the Federal Alcohol 
Administration Act found in Title 27 of the United States 
Code of Federal Regulations, Part 11 (27 CFR Sec. 11.1 
through 11.46), and nothing in these Rules shall be con- 
strued to authorize the return or exchange of wine products 
if the transaction is prohibited by federal law. 

Authority G.S. 18B-207; 188-1116; 27 C.F.R. 11.1 through 
11.46. 

.0711 PROHIBITED TRADE PRACTICES 

(a) General. It shall be a violation of these Rules for any 
industry member, whether or not licensed in this state, or 
any officer, director, employee or affiliate, to either directly 
or indirectly lend, give, furnish or offer to any retail 
jjermittee or his employee, or to the owner of the premises 
on which the business of a retailer is conducted, or for any 
retail permittee, employee, or owner to demand, require or 
accept from any industry member, any money, services, 
furniture, fixture, equipment, sign, glasses, barware, 
supplies or other thing of value, except as provided in these 
Rules. 

(b) Prohibited Services. By way of illustration, but not 
limitation, the following services shall not be furnished, 
given, provided or made available to a retail permittee by an 
industry member, even if the retailer is charged or billed for 
the services for their market value: 

(1) installing, repairing or maintaining equipment, 
outdoor signs or other fixtures; 

(2) promoting a retailer in advertising; 

(3) reconciling inventory for a retailer; 

(4) breaking down empty boxes, cases or cartons; 

(5) providing labor or employees to assist a retailer 
in the retailer's promotional events; 

(6) loaning or renting aerial displays or outdoor 
inflatables to a retailer for use, whether on or 
off the retailer's licensed premises; 

(7) pricing or repricing a product without the re- 
tailer's consent; 

(8) warehousing, by: 



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PROPOSED RULES 



(A) making rofrigoratcxl vehicles available to the 
retailer; or 

(B) delaying delivery from a manufacturer, im- 
porter, nonresident vendor or warehouse in 
order to enable the retailer to take advantage 
of promotional prices or for any other reason; 

(9) providing shelving schematics that are custom- 
ized for an individual retailer or group of retail- 
ers, whether based on total beer or wine sales 
records from one store or a group of stores, but 
an industry member may use its own sales 
statistics and records to develop a suggested 
shelf plan for alcoholic beverage products; 

(10) affixing special retailer stamps or stickers to 
beer or wine packaging, but a wholesaler may 
affix signs, stickers, stamps, or tags indicating 
the product's price to a container, shelf or 
display of its products; 

(11) entering delivery data on a retailer's in-store 
computer; 

(12) providing data processing services; 

(13) sponsoring sports leagues that are also sponsored 
by a retailer, or that use the facilities of a re- 
tailer for sporting events; 

(14) guaranteeing the loan of a retailer; 

(15) extending credit to a retailer; 

(16) failing to require a dejxjsit equal to that charged 
by the supplier on kegs and returnable bottles; 
or 

(17) negotiating special prices for or financing of 
equipment. 

(c) Prohibited Things of Value. By way of illustration, 
but not limitation, the following things of value shall not be 
furnished, given, loaned, rented or sold to a retail permittee 
by any industry member: 

(1) aerial displays or tethered inflatables; 

(2) parties given for retailers or groups of retailers' 
employees, unless otherwise allowed by the 
rules of the Commission; 

(3) prizes at retailer conventions; 

(4) advertising in a retailer periodical or advertising 
in a retailer publication designed for distribution 
to consumers; 

(5) outside signs; 

(6) cooperative advertising, including, but not 
limited to: 

(A) providing or assisting retailer promotions, 
whether on or off the retailer's premises; 

(B) participation with a retailer in the advertising 
of alcoholic beverages, the retailer's business 
or special events unless specifically approved 
by the Commission in the case of fundraisers 
for non-profit charitable organizations; 

(C) underwriting the cost of T-markers, scorecards 
or scoreboards by the purchase of advertising 
from a third party; or 

(D) customizing point-of-sale advertising materials. 



(7) 



(8) 
(9) 



novelties, glassware, consumer specialties or 
product displays by printing or having printed 
the retailer's name, slogan or logo on the item, 
unless otherwise specifically allowed in the 
rules of the Commission; 
making discounts, rebates or refunds to a retailer 
on the condition that the retailer use the dis- 
count, rebate or refund to pay off a loan; 
equipment, fixtures or furnishings; or 
clothing, except as provided in Rule .0713 of 
this Section. 



Statutory Authority G.S. 18B-207; 18B-1116(a)(3).(b). 
SECTION .1100 - FUEL ALCOHOL PERMITS 

.1104 DEFINITIONS 

The following terms shall have the following meanings 
when used in Rules . 1 105 through . 1 107 of this Section: 
"Fuel Alcohol Plant" means an establishment 



m 



£2} 



(3) 



(4) 



which holds an alcohol fuel producer's permit 
(federal operating permit) and a state Fuel Alco- 
hol permit issued pursuant to G.S. 18B-1 105(1?) to 
operate a distillery and produce and store distilled 
spirits for use as fuel alcohol. 
"Denaturing" means rendering fuel alcohol unfit 
for beverage purposes by adding the ingredients as 
described in one of the formulas listed in Rule 4 
NCAC 2T .1107. 

"Fuel alcohol" means distilled spirits of at least 
140 proof produced by a fuel alcohol plant for use 
only as fuel. 

"Fuel alcohol in process" means distilled spirits 
produced by a fuel alcohol plant which have not 
yet been distilled to the proof level required to 
qualify them as fuel alcohol. 



Statutory Authority G.S. 18B-207; 188-1 105(b). 

.1105 GENERAL RESTRICTIONS 

(a) A fuel alcohol permittee may not sell, or otherwise 
transfer any fuel alcohol or fijel alcohol in process to any 
person except as provided in this Section. 

(b) Fuel alcohol produced by the permittee may be used 
only as fuel. 

(c) A permittee may remove only denatured fuel alcohol 
from his plant premises. 

(d) A fuel alcohol permittee shall not possess any distilled 
spirits on the licensed premises other than denatured fuel 
alcohol and fuel alcohol in process. 

(e) The permittee's fuel alcohol plant must be secured by 
lock and key unless the permittee or his employee is on the 
premises. 

(f) A fuel alcohol permittee shall not possess more fuel 
alcohol in process on the licensed premises than his opera- 
tional still or stills are capable of processing at one time. 

(g) Fuel alcohol may not be removed from the permittee's 



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November 15, 1995 



1697 



PROPOSED RULES 



plant premises in any container smaller than five gallon 
capacity. 

Statutory Authority G.S. 18B-207; 18B-1105. 

.1106 STORAGE AND PACKAGING 

All distilled spirits possessed by a permittee on the 
licensed premises must be packaged and stored in accor- 
dance with the following requirements: 
(1) Each container used in the storage and packaging 
of fuel alcohol must be five gallon size or larger. 
Each container of fuel alcohol must be labeled to 



(2) 
01 

(4} 



reflect the formula used for denaturing. 

Each container of fuel alcohol must reflect the 

words "POISON - DENATURED FUEL ALCOHOL. 

NOT FIT FOR BEVERAGE USE OR HUMAN 

CONSUMPTION". 

Fuel alcohol in process must be stored in 55 

gallon or larger containers and labeled as "Fuel 

Alcohol In Process". The label shall also show 

the approximate proof of the fuel alcohol in 

process. 



Statutory Authority G.S. 18B-207; 18B-1105. 

.1107 DENATURING 

All fuel alcohol produced by a permittee must be immedi- 
ately denatured at the time of manufacture by placing the 
ingredients listed in one of the following formulas into each 
container before the container is filled with fuel alcohol in 
process: 

m 



Formula I ; For every 100 gallons of ethyl alcohol 
(fuel alcohol) add two gallons or more of either: 

(a) gasoline; 

£b} kerosene; or 

(c) methyl isobutyl ketone. 
£2} Formula n ^ For every 100 gallons of ethyl 
alcohol (fuel alcohol) add one-eighth ounce of 
denatonium benzoate N.F. (Bitrex) and two 
gallons of isopropvl alcohol. 

Statutory Authority G.S. 18B-207; 18B-1105. 

.1108 RECORD KEEPING 

A fuel alcohol permittee shall maintain records of: 

(1) the quantity, by batches, of fuel alcohol produced; 

(2) the quantity and type of ingredients used to pro- 
duce each batch of fuel alcohol; 

(3) the quantities of fuel alcohol on hand; 

(4) the quantities and types of materials added to 
denature each batch of fuel alcohol; and 

(5) the disposition of all fuel alcohol produced and not 
on hand. 

Statutory Authority G.S. 18B-207: 18B-1105. 



Notice is hereby given in accordance with G.S. 
150B-21.2 that the Department of Commerce, Division 
of Community Assistance intends to amend rules cited as 4 
NCAC 19L .0401, .0403, .0407, .0501 - .0502, .0505, 
.0802, .0805, .0901, .0906 - .0907, .0911, .1002, .1004, 
.1009, .1301 - .1303, .1701 - .1703; and adopt rules cited 
as 4 NCAC 19L . 1801 - . 1803. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conduaed at 1:30 p.m. on 
November 30, 1995 at 1307 Glenwood Avenue, Suite 250, 
Conference Room A, Raleigh, NC 27605. 

Reason for Proposed Action: The proposed aaion is 
necessary to enable the Division of Community Assistance to 
facilitate the implementation of the Community Development 
Block Grant Program in aid of which the rules were 
adopted. 

Comment Procedures: Oral or written comments will be 
accepted until December 15, 1995. Written comments 
should be sent to Bill McNeil, Director, Division of Commu- 
nity Assistance, P.O. Box 12600, Raleigh, NC 27605-2600. 
Oral comments should also be directed to Bill McNeil at 
(919) 733-2850. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of local government or state funds. 



CHAPTER 19 



DIVISION OF COMMUNITY 
ASSISTANCE 



SUBCHAPTER 19L - NORTH CAROLINA 

COMMUNTTY DEVELOPMENT BLOCK 

GRANT PROGRAM 

SECTION .0400 - DISTRIBUTION OF FUNDS 

.0401 GENERAL 

(a) The Division shall designate specific due dates or 
open periods of time for submission of grant applications 
under each category except for Housing Dovolopmcnt and 
Urgent Needs. Houoing D e v e lopm e nt and Urgent Needs 
applications may be submitted at any time, but other grant 
application submission dates or submission periods will be 
announced by the Division. 

(b) In cases where the Division makes a procedural error 
in the application selection process that, when corrected, 
would result in awarding a score sufficient to warrant a 
grant award, the Division may compensate that applicant at 
the earliest time sufficient funds become available or with a 
grant in the next funding cycle. 

(c) Applicants can apply for funding under the grant 
categories of Community Revitalization (except that no 
applications will be accepted for 1996 funding) . Housing 
Development, Community Entr e pr e n e urial Empowerment^ 



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PROPOSED RULES 



ft«d Urgent Needs and Infrastructure beginning with the 
1997 program year fimding . Applicants shall not apply for 
Contingency funding. Contingency awards will be made to 
eligible applicants in any category. Community Rovitnliza 

(d) Beginning with the 1996 program year, applications 
will be not accepted for the Community Revitalization or 
Infrastructure categories but will instead be accepted every 
other year. In the years when applications will be not 
accepted, the Division will fund Community Revitalization 
and Infrastructure applicants from the previous year until 
funds are exhausted. 

Authority G.S. 143B-10; 143B-431; 24 C.F.R. 570.483. 

.0403 SIZE AND USE OF GRANTS MADE TO 
RECIPIENTS 

(a) There is no minimum grant amount which applicants 
may request or be awarded. Grant awards made to any one 
recipient shall not exceed the following amount in each 
grant category: Community Revitalization: Concentrated 
Need and Infrastructure subcategories - eight hundred fifty 
thousand dollars ($850,000) and Scattered Site subcategory - 
five hundred thousand dollars ($500,000); Housing Develop- 
ment - two hundred fifty thousand dollars ($250,000) or 
funds available; Urgent Needs - six hundred thousand 
dollars ($6(X).000); Contingency - six hundred thousand 
dollars ($600,000); Community Entropronourinl Empower- 
ment implementation grant - one million dollars 
($1,000,000)^ and Entropronourial Empow e rm e nt planning 
grant — twenty thouoond dollaro ($20,000). Applicants shall 
not have a project or combination of projects under active 
consideration for funding which exceeds one million two 
hundred fifty thousand dollars ($1,250,000), except for 
Urgent Needs projects. Beginning with 1997 funding, 
applicants Applicants in the Community Revitalization 
category shall choose to apply for either a concentrated 
needs award , or an infraatruotur e award, or a scattered site 
award, but no more than one from the same HUD alloca- 
tion. 

(b) No local government may receive more than a total of 
one million two hundred fifty thousand dollars ($1,250,000) 
in CDBG funds in the period that the state distributes its 
annual HUD allocation of CDBG funds; except that local 
governments may also receive up to six hundred thousand 
dollars ($6(X).0(X)) for a project that addresses Urgent Needs 
and funds for one demonstration project in addition to other 
grants awarded during the same time period. 

(c) Community Revitalization basic category applicants 
may spend no more than 15 percent of their total grant 
amount to finance local option activities. Local option 
activities are eligible activities which do not need to be 
directly related to proposed projects except in the infrastruc- 
ture subcategory; however, job creation activities are not 
eligible local option activities. Local option activities will 
not be competitively rated by the Division, but may be 
limited to specific eligible activities. Each local option 



project must show that: 

(1) At least fifty-one percent of the CDBG funds 
proposed for each activity will benefit low- and 
moderate-income persons, except that CDBG 
funds may be used for acquisition, disposition, 
or clearance of vacant units to address the 
national objective of prevention or elimination of 
slums or blight; and 

(2) CDBG funds proposed for each activity will 
address the national objective of benefiting low- 
and moderate-income persons, or aid in the 
prevention or elimination of slums or blight. 

(d) The Division may review grant requests to determine 
the reasonableness and appropriateness of all proposed 
administrative and planning costs. Notwithstanding Rule 
.0910 of this Subchapter, grantees may not increase their 
approved planning and administrative budgets without prior 
Division approval. In no case, may applicants budget and 
expend more than 18 percent of the sum of funds requested 
and program income for administrative and planning 
activities for each project. 

(e) Applicants may spend CDBG funds in those areas in 
which the applicant has the legal authority to undertake 
project activities. 

(0 Grants to specific recipients will be provided in 
amounts commensurate with the size of the applicant's 
program. In determining appropriate grant amounts for 
each applicant, the Division may consider an applicant's 
need, proposed activities, all proposed administrative and 
planning costs, and ability to carry out the proposed activi- 
ties. 

Authority G.S. 1438-10; 1438-431; 24 C.F.R. 570.483; 42 
U.S.C. 5301. 

.0407 GENERAL APPLICATION REQUIREMENTS 

(a) Local governments shall submit applications as 
prescribed by this Rule in order to be considered for 
funding. Selection of applications for funding will be based 
primarily on information contained in the application; thus 
applications must contain sufficient information for the 
Division to rate them against the selection criteria. In 
addition, the following may be considered: information from 
any source which regards the eligibility of the applicant or 
application; the legality or feasibility of proposed activities; 
the applicant's compliance with application procedures 
specified in this Subchapter or the accuracy of the informa- 
tion presented in the application; evaluation of proposed 
projects by on-site review; and category-specific information 
described in Sections .0500, .0800, .1200, and .1300 of this 
Subchapter. All applicants shall address their projects to 
one of the following grant categories: Community Revital- 
ization (either concentrated need s, infmstruoturo or scattered 
site) and Infrastructure beginning with 1997 program year 
funds . Housing Development, Urgent Needs, or Community 
or Entropronourial Empowerment. Applicants may apply in 
more than one grant category, providing the total grant 



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November 15, 1995 



1699 



PROPOSED RULES 



application and award does not exceed the maximum limits 
described in Paragraphs (a) and (b) of Rule .0403 of this 
Section. Applicants shall submit an application that de- 
scribes each project in sufficient detail to be adequately 
rated. 

(b) Applications must be received by the Division's 
administrative offices in Raleigh before 5:00 p.m. on the 
submission date or sent by mail and postmarked on the 
submission date. 

(c) Applicants must provide citizens with adequate 
opportunity for meaningful involvement in the development 
of Community Development Block Grant applications. 
Specific citizen participation guidelines are described further 
in Rule .1002 of this Subchapter. If the Division is aware 
of an applicant's failure to meet these citizen participation 
requirements, the Division may not rate the application. 

(d) The Division may submit all CDBG applications and 
environmental review records as required by the National 
Environmental Policy Act and th e State Environmental 
Polio)' Act to the State Clearinghouse of the Department of 
Administration for review and comments. The Division 
may require each applicant to submit a written description 
of how the applicant proposes to address each comment 
received from the State Clearinghouse. 

(e) The applicant shall certify to the Division that it will 
comply with all applicable federal and state laws, regula- 
tions, rules and Executive Orders. Copies of these federal 
and state requirements are available for public inspection 
from the Division. 

(f) Applicants must comply with the Housing and Com- 
munity Development Act of 1974 as amended, all applicable 
federal and state laws, regulations, rules, and Executive 
Orders. 

(g) Application requirements described in this Rule .0407 
do not apply to demonstration grants and Urgent Needs 
grants, except for Paragraphs (a), (d), (f) and (g) of this 
Rule. 

(h) For multi-family rental housing activities, the appli- 
cant must state in the application the standards it has 
adopted for determining affordable rents for such activities. 

(i) Applicants that receive CDBG funding for projects 
may charge the cost of application preparation to prior 
CDBG programs or to the current program provided that 
procurement procedures consistent with 24 CFR 85.36 are 
followed. No more than three thousand five hundred dollars 
($3,500) may be charged to the CDBG program for applica- 
tion preparation. 

Authority G.S. 143B-10; 143B-431; 42 U.S.C.A. 5S04(a); 
24 C.F.R. 570.483. 

SECTION .0500 - COMMUNITY REVITALIZATION 
PROJECTS 

.0501 DESCRIPTION 

(a) The Community Revitalization category includes 
activities in which a majority of funds is directed towards 



improving, preserving or developing residential areas. All 
eUgible CDBG activities may be undertaken for the purpose 
of community revitalization. 

(1) Applications for funding may involve single or 
multiple activities, addressing one or more needs 
in the area except for infrastructure £no longer a 
subcategory after 1996) and scattered site subcat- 
egories which addresses one need. 

(2) All community revitalization activities, except 
for scattered site activities, must be carried out 
within defmed project areas. 

(3) Community Revitalization funds are distributed 
to eligible units of local government on a com- 
petitive basis. Community Revitalization pro- 
jects will be evaluated against other Community 
Revitalization project proposals. 

(b) The Community Revitalization category includes a 
subcategory for scattered site housing activities which are 
directed towards one hundred per cent low and moderate 
income benefit or the prevention or elimination of slums or 
blight. Scattered site projects are limited to housing 
rehabilitation, acquisition, disposition, clearance, and 
relocation activities. 

(1) Scattered site activities may be carried out in 
any location throughout the applicant's jurisdic- 
tion and need not be carried out in an area of 
concentrated need. 

(3) No local funds aro required or oxpcctod to bo 

contributed to ocattorod sito housing rohabilita 
tion proj e oto. 

£2} (3) Scattered site funds are distributed to eligi- 
ble units of local government on a competitive 
basis, and projects will be evaluated against 
other scattered site project proposals. 

(c) The Community Revitalization category includes a 
subcategory for public infrastructure projects within a 
definable project area. Projects will be evaluated against 
other infrastructure project proposals. (TTiis subcategory 
expires after the 1996 program year.) 

Authority G.S. 143B-10; 143B-431; 42 U.S.C.A. 5301; 24 
C.F.R. 570.483. 

.0502 ELIGIBILITY REQUIREMENTS 

(a) Applications for concentrated needs subcategory funds 
must show that: 

(1) At least 51 percent of the CDBG funds proposed 
for each project will benefit low- and moder- 
ate-income persons, except that CDBG funds 
proposed for local option activities may be used 
for acquisition, disposition, or clearance of 
vacant units to address the national objective of 
prevention or elimination of slums or blight: and 

(2) CDBG funds proposed for each activity will 
meet a national objective as specified in HUD 
regulations previously incorp>orated by reference, 
except that funds shall not be used to meet the 



1700 



NORTH CAROLINA REGISTER 



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PROPOSED RULES 



national objective of urgent need which is cov- 
ered by Rule .0801 of this Subchapter. 
Applications that do not meet these eligibility requirements 
will not be rated or funded. In designing projects which 
meet these requirements, applicants must appropriately 
ensure that activities do not benefit moderate-income 
persons to the exclusion of low-income persons. 

(b) Applicants for scattered site subcategory funds must 
show that: 

(1) Rehabilitation activities of occupied and vacant 
units must benefit 100 percent low and moderate 
income persons; and 

(2) CDBG funds proposed for rehabilitation, acqui- 
sition, clearance, and disposition of vacant units 
will address the national objective of preventing 
or eliminating slums or blight. 

(c) Applicants shall have the capacity to administer a 
CDBG program. The Division may examine the following 
areas to determine capacity: 

(1) audit and monitoring findings on previously 
funded Community Development Block Grant 
programs, and the applicant's fiscal accountabil- 
ity as demonstrated in other state or federal 
programs or local government financial reports; 
and 

(2) the rate of expenditure of funds and accomplish- 
ments in previously funded CDBG programs. 

Applicants that show a lack of capacity will not be rated or 
funded. 

Authority G.S. 143B-10; 143B-431; 42 U.S.C.A. 5301; 24 
C.F.R. 570.483. 

.0505 SELECTION CRITERIA 

Projects will be evaluated and rated in accordance with the 
annual statement of program design as approved by HUD. 
Rating factors are: 

(1) benefit to low and moderate income persons, 

(2) project severity of need, 

(3) project treatment of need, 

(4) appropriateness and feasibility of proposed project 
activities, and 

(5) local commitment of funds and ef community 
efforts. 

Authority G.S. 143B-10; 1438-431; 42 U.S.C.A. 5304(a)(1); 
24 C.F.R. 570.483. 



SECTION .0800 



URGENT NEEDS/CONTINGENCY 
PROJECTS 



safety; 

(2) the need addressed by the application must repre- 
sent a unique and unusual circumstance that does 
not occur frequently in a number of communities 
in the state; 

(3) the applicant does not have sufficient local re- 
sources, and state or federal resources are not 
available to alleviate the urgent need^ ; and 

(4) at least 5 1 porcont of tho CDBG funds proposed 

for th e proj e ot must ben e fit low and moderate 
inoome p e r s on s . 

Authority G.S. 1438-10; 1438-431; 42 U.SC.A. 5304(b)(3); 
24 C.F.R. 570.483. 

.0805 SELECTION CRITERIA 

Selection of Urgent Needs grant recipients will be based 
upon availability of funds and eligibility requirements as 
presented in Rule .0802 of this Subchapter. Preference will 
be given to applicants that can show that at least 51 percent 
of the CDBG funds proposed for the project will benefit low 
and moderate income persons. 

Authority G.S 1438-10; 1438-431; 42 U.S.C.A. 5304(a)(1); 
24 C.F.R. 570.483. 

SECTION .0900 - GRANT ADMDSTISTRATION 

.0901 GRANT AGREEMENT 

(a) Upon approval of the application by the Division, a 
written grant agreement will be executed between the 
recipient and the Division. These Rules, the approved 
application, and any subsequent amendments to the approved 
application shall become a part of the grant agreement. 

(b) The grant agreement in its original form and all 
modifications thereto shall be kept on file in the office of the 
recipient in accordance with Rule .0911 of this Section. 

(c) The Division may condition the grant agreement until 
the recipient demonstrates compliance with all applicable 
laws and regulations. In the case of Housing Development 
and Community Entrepreneurial Empowerment projects the 
grant agreement may be conditioned until legally binding 
commitments have been obtained from all participating 
entities. 

(d) Neither CDBG nor non-CDBG funds involved in a 
project may be obligated, nor may any conditioned project 
activities begin until the Division releases in writing any and 
all applicable conditions on the project. Recipients may 
incur costs prior to release of conditions with prior Division 
approval in accordance with Rule .0908 of this Section. 



.0802 ELIGIBILITY REQUIREMENTS 

Urgent Needs grant applicants must certify to all three 
fe«f of the following eligibility requirements: 

(1) the need addressed by the application must have 
arisen during the preceding 18-month period and 
represent an imminent threat to public health or 



Authority G.S. 1438-10; 1438-431; 24 C.F.R. 570.483. 

.0906 FINANCIAL MANAGEMENT SYSTEMS 

Recipient financial management systems shall provide for 
accurate, current and complete disclosure of the financial 
results of each grant program in accordance with fiscal 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1701 



PROPOSED RULES 



control and reporting requirements set forth in G.S. 159, 
Article IH, the Local Government Budget and Fiscal Control 
Act. Recipients shall meet the following requirements: 

(1) All grant funds shall be expended in accordance 
with a budget ordinance or project ordinance 
adopted under G.S. 159-8 and G.S. 159-13.2 
respectively; 

(2) A recipient may deposit or invest all or part of the 
cash balance of any grant fund; however, all 
interest earned shall be returned to the Department 
in accordance with Rule .0907(c) of this Section; 

(3) Investment deposits shall be secured as provided 
in G.S. 159-31fb); 

(4) The recipient shall designate as its official deposi- 
tories one or more banks or trust companies Ln the 
State in accordance with G.S. 159-3 1(a); 

(5) All budgetary accounting for appropriations of 
grant fimds shall be in accordance with the proce- 
dures for incurring obligations and disbursements 
as set forth in G.S. 159-28; 

(6) Each recipient shall establish an accounting system 
in accordance with G.S. 159-26; 

(7) The recipient's finance officer, and each officer, 
employee, or agent who handles or has in his 
custody more than one hundred dollars ($1(X).00) 
of grant funds at any time, or who handles or has 
access to the recipient's inventories, shall be 
bonded in accordance with G.S. 159-29; 

(8) Each recipient shall maintain records that identify 
adequately the source and application of funds for 
grant-supported activities. TTiese records shall 
contain information pertaining to federal awards 
and authorizations, obligations, unobligated bal- 
ances, assets, liabilities, outlays, and income; 

(9) A system for procedures for procurement and 
property management shall be provided in accor- 
dance with Rule .0908 and Rule .0909 of this 
Section; 

(10) All cash receipts must be deposited with, or to the 
credit of, the finance officer. This includes 
program revenues, reimbursements of travel, 
vendor payments or other items previously re- 
corded as expenditures, and all other grant moneys 
from the Department; 

(11) Recipients must develop a systematic method to 
assure timely and appropriate resolution of audit 
findings and recommendations; 

(12) Recipients shall require subgrantees to adopt the 
standards set forth in this Rule; 

(13) Recipients shall comply with the Office of Man- 
agement and Budget Circular A-87, entitled Cost 
Principles for State and Local government. In 
applying OMB A-87 the term "federal agency" 
shall mean the Department; 

(14) Recipients shall record the receipt and expenditure 
of project revenues from taxes, special assess- 
ments, levies, fines, etc., in accordance with 



generally accepted accounting principles; 
(15) Subrecipients shall comply with the Office of 

Management and Budget Circular A- 110, entitled 
Uniform Administrative Requirements for Grants 
and other Agreements with Institutions of Higher 
Education, Hospitals, and other Nonprofit Organi- 
zations. 

Authority G.S. 14-234; 143B-10; 143B-431; 159, Article III; 
24 C.F.R. 570.489; 24 C.F.R. 570.496; 42 U.S.C.A. 
5304(b), (d).(e). 

.0907 PROGRAM INCOME 

(a) Definition. Program Income is defmed as gross 
income earned by the recipient from grant supported 
activities. Such earnings may include, but not be limited to, 
sale of property, interest received from a loan program, and 
the return of sales taxes on purchases made during the 
program. Receipts derived from the operation of a public 
woric or facility, the construction of which was assisted by 
this program, do not constitute program income. 

(b) Unless the grant agreement provides otherwise, 
recipients shall have no obligation to the Department with 
respect to royalties received as a result of copyrights or 
patents produced under the grant or other agreement. 
Recipients must however, follow the procedures set forth in 
Rule .0909 PROPERTY MANAGEMENT STANDARDS. 

(c) All interest earned on grant funds prior to distribution 
shall be returned to the Department, except recipients may 
keep one himdred dollars ($100.00) per year for administra- 
tive expenses in accordance with 24 CFR 570.489(c)(2). 

(d) Recipients shall record the receipt and expenditure of 
revenues (such as taxes, special assessments, levies, fines, 
etc.) as a part of grant project transactions when such 
revenues are specifically earmarked for a grant project in 
accordance with the grant agreement. 

(e) Unless otherwise required, program income generated 
by a pre- 1986 grant may be retained by the recipient. 
Program income is identified by the grant year in which the 
activities which generated the program income were funded. 
Pre-1986 program income shall be added to funds commit- 
ted to a current project and used for activities approved in 
the project's application. Pre-1986 program income shall be 
expended prior to requesting additional funds from the 
Department or shall be used in future CDBG projects. 

(f) Program Income generated by grants made in 1986 or 
afterwards shall be returned to the Etepartment except when: 

(1) the recipient shall propose at the time of applica- 
tion or at the time the program income is antici- 
pated, a use or uses for the projected program 
income, and 

(2) the Department determines that, at the time of 
the proposal, the use of the projected program 
income meets federal requirements prohibiting 
the state from recapturing the program income; 
or 

(3) the recipient, designated at the time of the 



1702 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



preliminary grant award as a "severely dis- 
tressed county" pursuant to G.S. 105-130. 40(c), 
or a city in such a county, wishes to retain the 
program income to establish a local economic 
development revolving loan fiind. Any activities 
that are eligible under Title I of the federal 
Housing and Community Development Act of 
1974, as amended, and that meet at least one of 
the three national objectives of the Housing and 
Community Development Act may be under- 
taken. If the designation, pursuant to G.S. 
105-130. 40(c), as a "severely distressed county" 
is removed from a county, projects having 
received at least a preliminary grant award prior 
to the removal of the designation may continue 
to retain program income resulting from that 
grant as provided in this subsection. Provisions 
of 4 NCAC 19L .0913 apply at the time of 
closeout; or 
(4) the program income is generated from an Entre- 
preneurial Empowerment project, and the De- 
partment has approved the plan for re-use of 
program income, 
(g) Income after closeout and not subject to Rule .0907(e) 
and (f) of this Subchapter. 

(1) Except as may be otherwise provided under the 
terms of the grant agreement or any closeout 
agreement, program income of twenty-five ten 
thousand dollars ($25.000) ($10,000) or more 
received annually subsequent to the CDBG 
Program closeout shall be used for any eligible 
activity pursuant to Rule .0301 of this Subchap- 
ter. Recipients must receive Division approval 
in writing prior to obligation of program income 
under this Paragraph to determine if the pro- 
posed use is plainly appropriate to meeting the 
recipient's needs and objectives. When income 
received is less than twenty-five t«ft thousand 
dollars ($25,000) ($10,000) annually, the recipi- 
ent may spend the funds at the end of the 12 
month period according to its own needs; and 

(2) Accurate records shall be kept on all program 
income and reported annually to the Division 
when the annual amount exceeds twenty-five tea 
thousand dollars ($25.000) ($10,000) and to 
determine v.hen the twenty-five ten thousand 
dollars ($25,000) ($10,000) threshold is ex- 
ceeded subsequent to grant closeout. 



and other papers or property of recipients or their 
subgrantees and contractors pertaining to funds provided 
under this Subchapter for the purpose of making surveys, 
audits, examinations, excerpts and transcripts. 

fb) All Community Development Program records that 
are public under G.S. 132 shall be made accessible to 
interested individuals and groups during normal working 
hours, and shall be maintained at all times at the recipient's 
local government office, unless the recipient is authorized in 
writing by the Division to keep the records elsewhere. 

(c) Financial records, supporting documents and all other 
reports and records required under this Subchapter, and all 
other records pertinent to the Community Development 
Program shall be retained by the recipient for a period of 
three years from the date of the closeout of the program, 
except as follows: 

(1) Records that are the subject of audit findings 
shall be retained for three years or until such 
audit findings have been resolved, whichever is 
later; 

(2) Records for nonexpendable property which was 
acquired with Federal grant funds shall be 
retained for three years after its final disposition; 

(3) Records for any displaced person shall be re- 
tained for three years after he/she has received 
final payment; 

(4) Records pertaining to each real property acquisi- 
tion shall be retained for three years after settle- 
ment of the acquisition, or until disposition of 
the applicable relocation records in accordance 
with Subparagraph (3) of this Section, whichever 
is later; and 

(5) If a litigation, claim or audit is started before the 
expiration of the three year period, the records 
shall be retained until all litigations, claims, or 
audit findings involving the records have been 
resolved. 

(d) All records shall be sufficient to determine compliance 
with the requirements and primary objectives of the Com- 
munity Development Block Grant Program and all other 
applicable laws and regulations. All accounting records 
shall be supported by source documentation and shall be in 
compliance with Rule .0906 of this Section. 

Authority G.S. MSB- 10; 143B-431; 42 U.S.C.A. 
5304(d)(2), (e); 24 C.F.R. 570.490. 

SECTION .1000 - COMPLIANCE REQUIREMENTS 



Authority G.S. 143B-10; 143B-431; 24 C.F.R. 570.489; 42 
U.S.C.A. 5304(b)(4). 

.0911 RECORDKEEPING 

(a) The Secretary of the Department of Commerce, the 
Secretary of the Department of Housing and Urban Devel- 
opment, or any of their duly authorized representatives shall 
have access to all books, accounts, records, reports, files. 



.1002 CITIZEN PARTICIPATION 

(a) Each applicant and recipient shall provide citizens 
with an adequate opportunity for meaningful involvement on 
a continuing basis and for participation in the planning, 
implementation and assessment of the program. Each 
applicant and recipient shall provide adequate information to 
citizens, hold public hearings, provide for timely responses 
to citizens' complaints, and certify that it is following a 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1703 



PROPOSED RULES 



detailed Citizen Participation Plan as in Paragraphs (b) 
through (h) of this Rule. All public hearings shall be held 
by the governing board of the applicant or recipient, 
(b) Citizen participation in the application process. 
(1) Each applicant for CDBG funds shall: 

(A) Solicit and respond in a timely manner to 
views and proposals of citizens, particularly 
low- and moderate-income persons, members 
of minority groups, and residents of blighted 
areas where activities are proposed. Appli- 
cants shall respond in writing to written citizen 
comments. Responses shall be made within 
ten calendar days of receipt of the citizen 
comment. 

(B) Provide technical assistance to facilitate citizen 
participation, where requested. The technical 
assistance shall be provided to groups repre- 
sentative of persons of low- and moder- 
ate-income that request such assistance in 
developing proposals. The level and type shall 
be determined by the applicant. 

(C) Provide adequate notices of public hearings in 
a timely manner to all citizens and in such a 
way as to make them understandable to 
non-English speaking persons. Hearings must 
be held at times and locations convenient to 
potential or actual beneficiaries and with 
accommodations for the handicapped. A 
notice of the public hearing shall be published 
at least once in the nonlegal section of a news- 
paper having general circulation in the area. 
The notice shall be published not less than ten 
days nor more than 25 days before the date 
fixed for the hearing. The notice of public 
hearing to obtain citizens' views after the 
application has been prepared, but prior to the 
submission of the application to the Division, 
shall contain a description of the proposed 
project(s) including the proposed project loca- 
tion, activities to be carried out, and the total 
costs of activities. 

(D) Schedule hearings to obtain citizens' views and 
to respond to citizen proposals at times and 
locations which permit broad participation, 
particularly by low- and moderate-income 
persons, members of minority groups, handi- 
capped persons, and residents of blighted 
neighborhoods and project areas. 

(E) Conduct one public hearing during the plan- 
ning process to allow citizens the opportunity 
to express views and proposals prior to formu- 
lation of the application^ except that applicants 
in the Urgent Needs category are exempt from 
holding this public hearing . 

(F) Conduct one public hearing after the applica- 
tion has been prepared but prior to submission 
of the application to the Division. 



(2) Submitting objections to the Division. 

(A) Persons wishing to object to the approval of an 
application by the Division shall submit to the 
Division their objections in writing. The 
Division wUl consider objections made only on 
the following grounds: 

(i) The applicant's description of the needs 
and objectives is plainly inconsistent with 
available facts and data, 
(ii) The activities to be undertaken are plainly 
inappropriate to meeting the needs and 
objectives identified by the applicant, and 
(iii) The application does not comply with the 
requirements of this Subchapter or other 
applicable laws. 

(B) All objections shall include an identification of 
the requirements not met. In the case of 
objections made on the grounds that the de- 
scription of needs and objectives is plainly 
inconsistent with significant, generally avail- 
able facts and data, the objection shall include 
the facts and data upon which the objection is 
based. 

(c) Citizen Participation Plan. Recipients shall develop 
and adopt, by resolution of their governing board, a written 
citizen participation plan developed in accordance with all 
provisions of this Rule and which: 

(1) provides for and encourages citizen participation 
with particular emphasis on participation by 
persons of low- and moderate-Income who are 
residents of slum and blight areas and of areas 
in which CDBG funds are proposed to be used; 

(2) provides citizens with reasonable and timely 
access to local meetings, information, and 
records relating to the recipient's proposed and 
actual use of funds; 

(3) provides for technical assistance to groups 
representative of persons of low- and moder- 
ate-income that request such assistance in accor- 
dance with Part (b)(1)(B) of this Rule; 

(4) provides for public hearings to obtain citizen 
views and to respond to proposals and questions 
at all stages of the community development 
program in accordance with Paragraphs (b), (f), 
and (g) of this Rule; 

(5) provides a procedure for developing timely 
written responses to written complaints and 
grievances within ten calendar days of receipt of 
the complaint. The procedure shall include all 
provisions of Paragraph (d) of this Rule; and 

(6) identifies how the needs of non-English speaking 
residents will be met in the case of public hear- 
ings where a significant number of non-English 
speaking residents can be reasonably expected to 
participate. 

(d) The recipient shall develop and adopt a written 
complaint procedure to respond to citizen complaints 



1704 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



involving the CDBG program. The complaint procedure 
shall be applicable through the life of the grant and available 
to the general public. It shall specify that the recipient will 
respond in writing to written citizen complaints within ten 
calendar days of receipt of the complaint. The procedure 
shall include a phone number for further information or 
clarification on the complaint procedure and shall identify 
any local procedures or appeals process that would normally 
be used by the recipient to address citizen complaints. The 
complaint procedure shall also state that if a citizen lodging 
a complaint is dissatisfied with the local response, then that 
person may direct the complaint to the North Carolina 
Division of Community Assistance. 

(e) Citizen participation during program implementation. 
Citizens shall have the opportunity to comment on the 
implementation of a Community Development Program 
throughout the term of the program. Recipients shall solicit 
and respond to the views and proposals of citizens in the 
same manner as in Part (b)(1)(A) of this Rule. 

(f) Citizen participation in the program amendment 
process. 

(1) Recipient procedures. 

(A) Recipients proposing amendments which 
require prior Division approval in accordance 
with Rule .0910 of this Subchapter will be 
required to conduct one public hearing prior to 
submission of the amendment to the Division 
in the same manner as in Part (b)(1)(C) of this 
Rule. 

(B) Each recipient shall respond to citizen objec- 
tions and comments in the same manner as in 
Part (b)(1)(A) of this Rule. 

(2) Submitting Objections to the Division. 

(A) Persons wishing to object to the approval of an 
amendment by the Division shall make such 
objection in writing. TTie Division will con- 
sider objections made only on the following 
grounds: 

(i) The recipient's description of needs and 
objectives is plainly inconsistent with 
available facts and data, 

(ii) The activities to be undertaken are plainly 
inappropriate to meeting the needs and 
objectives identified by the recipient, and 

(iii) The amendment does not comply with the 
requirements of this Section or other appli- 
cable laws and regulations. 

(B) All objections shall include an identification of 
the requirements not met. In the case of 
objections made on the grounds that the de- 
scription of needs and objectives is plainly 
inconsistent with significant, generally avail- 
able facts and data, the objection shall include 
the facts and data upon which the objection is 
based. 

(g) Citizen participation in the program closeout process. 
(1) Recipients shall conduct one public hearing to 



assess program performance during the grant 
closeout process and prior to the actual closeout 
of the grant in the same manner as in Part 
(b)(1)(C) of this Rule. 
(2) Recipients shall continue to solicit and respond 
to citizen comment in the same manner as in 
Part (b)(1)(A) of this Rule until such time as the 
grant program is closed, 
(h) Persons may submit written comments to the Division 
at any time concerning the applicant's or recipient's failure 
to comply with the requirements contained in this Subchap- 
ter. 

(i) All records of public hearings, citizens' comments, 
responses to comments and other relevant documents and 
papers shall be kept in accordance with Rule .091 1 of this 
Subchapter. All program records shall be accessible to 
citizens in accordance with Rule .0911(b) of this Subchap- 
ter. 

Authority G.S. 143B-10; 143B-431; 42 V.S.C.A. 5304(a)(2); 
24C.F.R. 570.486. 

.1004 ENVIRONMENTAL REVIEW 

Applicants and recipients shall comply with the policies of 
the National Environmental Policy Act of 1969 and all other 
applicable provisions of Federal and State law which further 
the purposes of such act (as specified in 24 C.F.R. Part 58). 
This Subchapter incorporates by reference 24 CFR Part 58, 
including subsequent amendments and editions. Copies of 
this federal regulation are available for public inspection 
from the Division of Community Assistance. Single copies 
are available from this Division in Raleigh, North Carolina, 
for one dollar ($1.00) each. 

(1) Applicants and recipients shall assume the respon- 
sibilities for environmental review, deci- 
sion-making, and other actions which would 
otherwise apply to the Secretary, under NEPA and 
other provisions of law which further the purposes 
of NEPA in accordance with section 104(f)(4) of 
Title I of the Housing and Community Develop- 
ment Act of 1974, as amended and the implement- 
ing regulations at 24 C.F.R. Part 58. 

(2) Applicants and recipients shall meet the require- 
ments of the following Federal laws and regula- 
tions: 

(a) The National Environmental Policy Act of 1969 
("NEPA", 42 U.S.C. 4321 et seq., P.L. 91-190) 
which establishes national policy, goals, and 
procedures for protecting, restoring and enhanc- 
ing environmental quality; 

(b) Environmental Review Procedures for Title I 
Community Development Block Grant Pro- 
grams, (24 C.F.R. Part 58), which sets forth the 
procedures for carrying out the environmental 
responsibilities under NEPA; 

(c) Executive Order 11988, Floodplain Manage- 
ment, May 24, 1977 (42 F.R. 26951 et seq.); 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1705 



PROPOSED RULES 



(d) Executive Order 11990, Protection of Wetlands, 
May 24, 1977 (42 F.R. 26961 et seq.); 

(e) The Coastal Zone Management Act of 1972, (16 
U.S.C. 1451 et seq.), as amended; 

(f) The Safe Drinking Water Act of 1974 (42 
U.S.C. 201, 300(f) et seq., and 21 U.S.C. 349), 
as amended, particularly concerning sole source 
aquifers; 

(g) The Endangered Species Act of 1973 (16 U.S.C. 
1531 et seq.), as amended; 

(h) The Wild and Scenic Rivers Act of 1968 (16 

U.S.C. 1271 et seq.), as amended; 
(i) The Clean Air Act (42 U.S.C. 7401 et seq.); 
(j) The Fish and Wildlife Coordination Act of 1958 

as amended, (16 U.S.C. 661 et seq); 
(Ic) The Federal Water Pollution Control Act (P.L. 

92-500); 
(1) HUD environmental criteria and standards (24 
C.F.R. Part 51), and the Council on Environ- 
mental Quality Standards at 40 C.F.R. Part 
1500-1508; 
(m) The National Historic Preservation Act of 1966 

(16 U.S.C. 470 et seq.) as amended; 
(n) Procedures for the Protection of Historic and 

Cultural Properties, 36 CFR 800; 
(o) Executive Order 11593, Protection and Enhance- 
ment of the Cultural Environment. May 13, 
1971 (36 F.R. 8921 et seq.); 
(p) The Reservoir Salvage Act of 1960 (16 U.S.C. 
469 et seq.); as amended by the Archaeological 
and Historic Preservation Act of 1974; and 
(q) The Flood Disaster Protection Act of 1973 (42 
U.S.C. 4001 et seq.), as amended. 

(5) ApplicontD and r e cipi e nts ohall oubmit ad e quat e 

information in a form pr e scrib e d by the Divioion 
on tho onvironmontnl impact of ooch project so 
that the Division can dotermino project complianco 
with th e r e quir e m e nts — of th e North Carolina 
Environmental Policy Aot of 1971 (SEPA) (G.S. 
113A Article 1). A dotormination by tho Division 
that the project complies with tho r e quirements of 
SEPA will b e mado before tho D e partm e nt will 
r e l e as e funds to the r e cipi e nt. 
(3) (4^ The applicant and recipient shall meet the 
requirements of the following State laws and rules 
where they are applicable to the provisions of this 
Subchapter: 

(a) Chapter 113 A of the General Statutes of North 
Carolina, entitled Pollution Control and Environ- 
ment; 

(b) G.S. 143-215.108 which designates the Environ- 
mental Management Commission as the issuing 
authority for air quality permits; 

(c) G.S. 143-215.1 which governs water pollution 
jjermits and designates the Environmental Man- 
agement Commission as the issuing authority; 

(d) G.S. 121-12, Protection of Properties on the 



National Register, which requires consideration 
of project impact on any property listed in the 
National Register; and 
(e) G.S. 70-1 through 70-3, Indian Antiquities laws, 
which urges private landowners to refrain from 
excavation and other actions leading to the 
destruction of Indian archaeological sites on their 
property. It also requires local governments to 
report the discovery of artifacts and refrain from 
further excavation or construction when excavat- 
ing or constructing on public lands. 

(4) {%) It is the responsibility of the recipient to 
obtain aU air pollution and water pollution permits 
for a CDBG program pursuant to Subparagraph 
(4) of this Rule. 

(5) f6) All records and data shall be maintained 
pursuant to Rule .0911 of this Subchapter. 

Authority G.S. 143-215.1; 143-215.108; 143B-10; 143B- 
431; 24 C.F.R. Part 58; 24 C.F.R. 570.487; 42 U.S.C. A. 
4321 through 4370; 42 U.S.C. A. 5304(b)(4). 

.1009 HOUSING REHABILITATION 

(a) Grant assistance may be used for housing rehabilita- 
tion activities eligible under Rule .0301 of this Subchapter. 

(b) Housing shall be rehabilitated at least to Section 8 
Housing Quality Standards, as defined in 24 C.F.R. 
882.109. 

(c) Replacement construction and construction elements 
that are exposed during rehabilitation, shall be done Ln 
compliance with the North Carolina State Building Code, 
Volumes I, IB, H, HI and IV. 

(d) Section 8 Housing Quality Standards shall not be 
applicable when work is funded under Local Option Activi- 
ties as described in Rule .0403(c) of this Subchapter. 

(e) Housing rehabiUtation activities must comply with the 
following standards required under this Subchapter: 

(4) Arohit e otural barri e rs (Rule . 1007); 

(1) (3) Lead-based paint CRule .1011); and 
(2} (^Equal opportunity (Rule .1001). 
(0 The recipient shall provide for reasonable benefits to 

any person involuntarily and permanently displaced as a 

result of the use of CDBG assistance to substantially 

rehabilitate property. 
(g) Homes inhabited by disabled or elderly persons must 

be analyzed as to the physical needs of such persons. 

Improvements such as widened doorways, ramps, level 

entry and doorways, and grab bars in bath areas must be 

installed if appropriate. 

Authority G.S. 143B-10; 143B-431: 24 C.F.R. 570.487; 42 
U.S.C. A. 5305(a). 

SECTION .1300 - HOUSING DEVELOPMENT 
PROJECTS 

.1301 DESCRIPTION 



1706 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Grants under this category will support the development of 
dev e lop housing opportunities for low- and moderate-income 
persons. The Division may limit the use of program funds 
to specific eligible activities. 

Authority G.S. 143B-10; 143B-431: 24 C.F.R. 570.483. 

.1302 ELIGIBILITY REQUIREMENTS 

(a) Applications for Housing Development funds must 
show that: 

(1) At least 51 percent of the CDBG funds proposed 
for each project will benefit low- and moder- 
ate-income persons; and 

(2) CDBG funds proposed for each activity will 
meet a national objective as specified in HUD 
regulations previously incorporated by reference, 
except that funds shall not be used to meet the 
national objective of urgent need which is cov- 
ered by Rule .0801 of this Subchapter. 

Applicants that do not meet these requirements will not be 
rated or funded. 

(b) Applicants shall have the capacity to administer a 
Community Development Block Grant Program. The 
Division may examine the following areas to determine 
capacity: 

(1) audit and monitoring findings on previously 
funded Community Development Block Grant 
Programs, and the applicant's fiscal accountabil- 
ity as demonstrated in other state or federal 
Programs or local government financial reports; 
and 

(2) the rate of expenditure of funds in previously 
funded Community Development Block Grant 
Programs. 

{^ — Housing D e v e lopment proj e cts will b e rat e d by th e 
Divi s ion against the following specific criteria: 

f4^ 85% of the project rating i s ba s ed upon the 

proj e ct d e sign including th e f e asibility of th e 
project, its financial d e sign, th e capacity and 
experience of the applicant and other parties 
involved, the amount of leveraging other funds, 
th e s uitability of the site and surrounding am e ni 
ti e s, and th e d e mand from th e mark e t: and 



^3^ 



15% of the 



based 



-th« 



ot ttie project rating is based upon 
benefit to low and moderate income persons 
both imm e diate and long t e rm. 



Authority G.S. 143B-10; 1438-431: 24 C.F.R. 570.482; 24 
C.F.R. 570.483. 

.1303 SELECTION CRITERIA 

(a) Selection criteria will be announced by the Division 
prior to accepting applications for this category. The 
Division may accept applications on a continuous basis for 
d e v e lopm e nt grant at any time after the announcement of 
selection criteria. 

(b) Housing Development projects will be rated by the 



Division against the following specific criteria: 

(1) 85% of the project rating is based upon the 
project design including the feasibility of the 
project, its financial design, the capacity and 
experience of the applicant and other parties 
involved, the amount of leveraging other funds, 
the suitability of the site and surrounding ameni- 
ties, and the demand from the market; and 

(2) 15% of the project rating is based upon the 
benefit to low and moderate income persons 
both immediate and long-term. 

Authority G.S. 1438-10; 1438-431; 24 C.F.R. 570.489. 

SECTION .1700 - COMMUNITY EMPOWERMENT 
PROJECTS 

.1701 DESCRIPTION 

Grants under the Community Entr e pr e neurial Empower- 
ment Category will improve economic opportunities for low- 
and moderate-income persons. 

Authority G.S. 1438-10; 1438-431; 24 C.F.R. 570.483. 

.1702 ELIGIBILITY REQUIREMENTS 

Applications for Community Entrepren e urial Empower- 
ment funds must show that: 

(1) At least 51 percent of the CDBG funds proposed 
for each project will benefit low- and moder- 
ate-income persons; and 

(2) CDBG funds proposed for each activity will meet 
a national objective as specified in HUD regula- 
tions previously incorporated by reference, except 
that funds shall not be used to meet the national 
objective of urgent need which is covered by Rule 
.0801 of this Subchapter. 

Applicants that do not meet these requirements will not be 
rated or funded. 

Authority G.S. 1438-10; 1438-431; 24 C.F.R. 570.482; 24 
C.F.R. 570.483. 

.1703 SELECTION CRITERIA 

Selection criteria will be announced by the Division 4§ 
days prior to accepting applications for the Community 
Entrepr e n e urial Empowerment Category. The Division may 
accept applications during a specified open period after the 
announcement of selection criteria. Criteria for awards are: 

(1) community need, 

(2) community impact, 

(3) project design, and 

(4) financial feasibility. 

Authority G.S. 1438-10; 1438-431; 24 C.F.R. 570.489. 
SECTION .1800 - INFRASTRUCTURE PROJECTS 



10:16A 



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November 15, 1995 



1707 



PROPOSED RULES 



.1801 DESCRIPTION 

Beginning with the 1997 program year funding, local 
poverrunents may apply for projects that involve infrastruc- 
ture only. The Infrastructure category includes activities in 
which funds are directed towards improving, preserving or 
developing residential areas through the extension or 
installation of public infrastructure. 
(1) Applications for funding must address the single 

need of public infrastructure. 
("21 All infrastructure activities must be carried out 

within defined project areas. 
(31 Infrastructure funds are distributed to eligible units 
of local government on a competitive basis. 
Infrastructure projects will be evaluated against 
other Infrastructure project proposals. 
(41 Infrastructure applicants my spend UE to 15 per- 
cent of their total grant amount to finance local 
option activities as specified in the application 
guidelines. 



Authority G.S. 143B-10; 
C.F.R. 570.483. 



143B-431: 42 U.S.C.A. 5301; 24 



.1802 ELIGIBILITY REQUIREMENTS 

(a) Applications for infrastructure funds must show that: 

(1) At least 51 percent of the CDBG funds proposed 
for each project will benefit low- and moder- 
ate-income persons; and 

(2) CDBG funds proposed for each activity will 
meet a national objective as specified in HUD 
regulations previously incorporated by reference, 
except that funds shall not be used to meet the 
national objective of urgent need which is cov- 
ered by Rule .0801 of this Subchapter. 

Applications that do not meet these eligibility requirements 
will not be rated or funded. In designing projects which 
meet these requirements, applicants must appropriately 
ensure that activities do not benefit moderate-income 
persons to the exclusion of low-income persons. 

(b) Applicants shall have the capacity to administer a 
CDBG program. The Division may examine the following 
areas to determine capacity: 

(1) audit and monitoring findings on previously 
funded Community Development Block Grant 
programs, and the applicant's fiscal accountabil- 
ity as demonstrated in other state or federal 
programs or local government financial reports; 
and 

(2) the rate of expendiUire of funds and accomplish- 
ments in previously funded CDBG programs. 

Applicants that show a lack of capacity will not be rated or 
funded. 



Projects will be evaluated and rated in accordance with the 
annual statement of program design as approved by HUD. 
Rating factors are: 

(11 benefit to low and moderate income persons. 

(21 project severity of need. 

(31 project treatment of need. 

(41 appropriateness and feasibility of proposed project 
activities, and 

(5) local commitment of funds or community efforts. 

Authority G.S. 143B-10; 1438-431; 42 U.S.C.A. 5304(a)(1); 
24 C.F.R. 570.483. 



TITLE 10 - DEPARTMENT OF HUMAN 
RESOURCES 

Notice is hereby given in accordance with G.S. 
1508-21. 2 that the DHR/Division of Services for the 
Blind/Commission for the Blirul intends to amend rules cited 
as 10 NCAC 19C .0209. .0408 - .0410, .0504, .0509 - 
.0512, .0602, .0604, .0702 - .0703. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conduaed at 9:00 a.m. - 12:00 
p.m. on November 30, 1995 at the Division of Services for 
the Blind, CMS Campus, Fisher Building, 309 Ashe Avenue, 
Raleigh, NC 27606. 

Reason for Proposed Action: Terminology update, 
clarification of grievance procedures, update operator 
classification system section, bring procedures in line with 
General Statutes. 

Comment Procedures: Any interested person may present 
his/her comments either in writing at the hearing or orally 
at the hearing. All comments must be received in the 
Division by 5:00pm on December 15, 1995. Any person 
may request information, permission to be heard, or copies 
of the proposed regulations, by writing or calling John 
DeLuca, Division of Services for the Blind, 309 Ashe 
Avenue, Raleigh, NC 27606, (919) 733-9822. 

Fiscal Note: These Rules do not ajfect the expenditures or 
re\enues of local government or state funds. 



Authority G.S. 1438-10; 143B-431; 42 U.S.C.A. 5301; 24 
C.F.R. 570.483. 

.1803 SELECTION CRITERIA 



1708 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



CHAPTER 19 - SERVICES FOR THE BLIND 

SUBCHAPTER 19C - BUSINESS ENTERPRISES PROGRAM 

SECTION .0200 - LICENSING AND PLACEMENT 

.0209 FILLING OF VACANCIES 

(a) A listing of available concession stand locations will be made available to all licensees. This listing will provide 
information about the location, and will also specify any particular work experience, education, or abilities which may be 
required at that location. 

(b) Licensees who wish to be assigned to any of the locations listed may make application through the appropriate regional 
division office responsible for administering the concession stand program. 

(c) Transfers and promotions, will be based on the following procedures: 

(1) A notice of available facilities will be sent to each licensee on the last working day of the month. The notice will 
provide a short description of the vacancy and who to contact for more information. 

(2) All applications must be post-marked by the 10th of the following month and mailed to the Chief of Business 
Enterprises at the State Office, 309 Ashe Avenue, Raleigh, N.C. 27606. 

(3) Interviews will be conducted on the second Friday of the month which follows the application deadline. 

(4) At least 10 working days prior to the interview, the Business Enterprises Counselor who works with the applicant 
will calculate the applicant's points for sanitation, seniority, Financial Analysis/Operating Standards 
[Subparagraphs (d), (1), (2), (3) of this Rule] and inform the applicant of his jX)int total. The applicant will have 
five working days to review the point total and request any adjustments. 

(5) After adding together the points from the sanitation, seniority, Financial Analysis/Operating Standards, Customer 
Relations and Oral Exam/Interview Sections [Subparagraphs (d), (1), (2), (3), (4), (5), (6), (7)) of this Rule] for 
each applicant, the applicant with the highest jX)int total (if above 60 points) will be awarded the vacancy. If the 
applicant with the highest point total declines to accept the location, it will be offered to the next highest applicant 
(if above 60 points) and so on. In the case of an exact tie, the applicant with the most time in the Business 
Enterprises Program will be awarded the location. 

(6) Applicants will be notified as soon as possible after their interview whether or not they have been awarded a 
location. (Notified by phone, followed up in writing). 

(7) Upon being awarded a location, the applicant has 30 days to fill the vacancy, unless the Division and the 
applicant agree to another time frame. The location may not be filled for 15 working days following the award 
to allow time for administrative appeals to be filed. If an appeal is filed, the location will not be filled until the 
appeal is resolved. If there is only one applicant for a location, the 15 day waiting period does not apply. 

(8) If an applicant is awarded a facihty and does not accept the position, the applicant will not be able to apply for 
another (xjsition for one year. An applicant may withdraw his application up to two days prior to his interview 
and avoid the jjenalty. Applicants who apply for and are awarded more than one location will not be penalized 
as long as they accept one award. 

(9) If an applicant is awarded a facility and has not had an Operator Agreement with the Agency in the last two 
years, the applicant may be required to repeat the necessary on-the-job-training. The Interview Committee may 
also recommend refresher course training as necessary to assure qualified management. 

(10) Licensees/operators not selected have the right to file an administrative appeal as provided for in Subchapter 19C 
Section .0400. The fifteen-day limit to file an appeal will begin from the date informed by telephone of the 
results of the award. 

(11) An applicant must have operated a Business Enterprises location for six months prior to the cut-off date for 
calculating financial performance according to standards to be considered an operator otherwise, he will be in 
licensee status. 

(12) If an operator leaves the Business Enterprises Program and then applies for a location within 12 months of 
leaving, his financial performance according to standards for the 12 months prior to his leaving will be used to 
calculate points in the Financial Performance Section. 

(13) Financial analyses of facilities will be done every two years. TTie analysis is on the facility not the operator; 
however, if an operator enters a facility and makes major changes, he may request a new analysis after at least 
four months in the new facility, or the Rehabilitation Supervisor may order a new analysis. If an applicant's 
financial analysis is more than two years old but less than two and one half years old and the applicant's 
performance is neither above 100% nor below 85% on either measure, the financial analysis will be considered 
current. 

(14) An applicant who does not hold the appropriate license for the vacancy may be awarded the facility contingent 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1709 



PROPOSED RULES 



upon successfully completing the necessary training. Applicants who hold the correct level of license but have 
not operated a facility at that level for at least two years may be required, at the discretion of the Interview 
Committee, to complete refresher training. 

(15) An operator may not sit on the Interview Committee for a location for which he is applying. If the Vice- 
Chairman and the Chairman of the Food Sorvioo Committoo Elected Committee of Vendors and the Chairman 
of the sub-committee on Transfer and Promotion are all restricted from sitting on the Interview Committee under 
this Rule, those three must pick another Food Sep . 'io e Committoo Elected Committee of Vendors member to sit 
on the Interview Committee. 

(16) The schedule for interviewing and awarding vacancies may be changed at certain times of the year to 
accommodate holidays, too many applications to be processed in one day, and the end-of-year close-out. 

(17) Applicants will be reimbursed for their expenses to come to the interview at the state's established rates. The 
Business Enterprises Program will only reimburse for two interviews per year. After that, applicants must bear 
their own expenses for coming to interviews. Licensees who have active Rehabilitation cases should be 
reimbursed through the Rehabilitation program. 

(d) Criteria To Be Used In Determining Points: 

(1) Sanitation: 

(A) Ten point maximum, 

(B) One point for each sanitation grade point above ninety, 

(C) Sanitation grade to be arrived at by a\eraging all sanitation scores received during last two years, 

(D) Five points will be subtracted for any adjusted B grade in the last two years, 

(E) The Business Enterprises Counselor will determine an adjusted grade by adding back in any points subtracted 
for deficiencies over which the operator has no control. Operator must inform Business Enterprises Counselor 
when an inspection has occurred so he can review the inspection and adjust the grade if needed. It is the 
operator's responsibility to make sure the Business Enterprises Counselor has copies of every sanitation 
inspection form from the relevant period so that they can calculate an accurate grade. 

(2) Seniority: 

(A) Five point maximum, 

(B) Seniority points will be awarded as follows: 

Years in Business Enterprises Program - Points 
to 4.99 - points 
5 to 9.99 - 1 point 
10 to 14.99 - 2 points 
15 to 19.99 - 3 points 
20 to 24.99 - 4 points 
25 and over - 5 points 

(C) Seniority is defined as the amount of time in full month increments an individual has been working in the 
Business Enterprises Program as a licensee or operator. A licensee/operator must work 51% of the working 
days in a month to receive credit for that month. The cutoff date for accruing time in the Program will be the 
end of the month when the vacancy is advertised. 

(3) Performance According to Financial Analysis/Operating Standards: 

(A) 50 Points Maximum, 

(B) Applicants will receive 20 points for meeting their sales standard, 

(C) Applicants will receive 20 points for meeting their gross profit percentage standard, 

(D) Applicants will receive 5 points for meeting or exceeding 92.5% of their sales optimum 

(E) Applicants will receive 5 points for meeting or exceeding 92.5% of their gross profit percentage optimum, 

(F) Points according to Financial Analysis/Operating Standards in this Section will be calculated as follows: 

(i) Use sales and gross profit figures for the twelve month period ending with the last day of the same month 
in which the vacancy is advertised. This is the cut-off date for financial performance calculations. 

(ii) Take the facility's average monthly sales for the past twelve months, and calculate what percentage of the 
optimum it is. If it is over 85%, the applicant gets 20 points: if if is 92.5% or more, the applicant gets 
an additional 5 points. 

(iii) Take the facility's gross profit percentage for the last twelve months and calculate what percentage of the 
optimum it is. If it is over 85%, the applicant gets an additional 5 points. Example - TTie Level II facility 
in the XYZ Building has a sales standard of three thousand dollars ($3,000) per month with an optimum 
of three thousand five hundred and twenty-nine dollars ($3,529) per month. Its gross profit percentage 
standard is 40% with an optimum of 47%. The actual performance for the past twelve months of the 
facility is three thousand five hundred dollars ($3,500) per month in sales and a 42.3% gross profit 



1710 NORTH CAROLINA REGISTER November 15, 1995 10:16A 



PROPOSED RULES 



percentage. Three thousand five hundred dollars ($3,500) in sales is 99.1% of the optimum sales and a 
42.3% gross profit percentage is 90% of the optimum gross profit. The applicant would receive 20 points 
for meeting his sales standard 5 points for exceeding 92.5% of his sales optimum and 20 points for meeting 
his gross profit percentage standard. Out of a possible 50 points for financial performance, the applicant 
would get 45 points. 

(4) Customer and Building Management Relations: 

(A) Five jX)ints will be deducted for each substantiated customer complaint in the past two years, up to a maximum 
of 10 points. 

(B) If the applicant has more than three substantiated customer complaints, he will not be considered for the award. 
A substantiated complaint is a written complaint which results in a letter to the operator with a copy to the 
operator's personnel file. The operator has the right to appeal the letter at the time the letter is placed in the 
operator's personnel file. No building management complaint can be used against an operator prior to June 
1, 1993. 

(5) Oral Exam/Interview: 

(A) 30 points maximum. 

(B) Interview will be face to face (no conference calls). 

(C) Interviews will be conducted on the second Friday of the month which follows the month applications are due. 

(D) All applicants must be interviewed. 

(E) Oral Exam/Interview will be conducted by: 

(i) the Chief of Business Enterprises, or Deputy Chief or Assistant Director of Programs and Facilities as 

designated by Chief, 
(ii) the Area Rehabilitation Supervisor or B.E. Counselor for the area in which the vacancy occurs, and 
(iii) the Vice-Chairman of the Food S e rvic e Committ ee Elected Committee of Vendors or the Chairman in his 
absence, or in the absence of the Chairman, the Chairman of the Transfer and Promotion subcommittee. 

(F) The Oral Exam part will consist of 10 questions drawn either from a pool of standard questions or developed 
by the interview committee prior to the interview. The oral exam questions will relate to any special needs of 
the vacant facility as well as to standard responsibilities and knowledge areas of Business Enterprises operators. 
Each member of the Interview Committee will evaluate the applicant's response to each question in the oral 
exam and assign either zero, one, one and a half or two points to the apphcant's answer. There will be at least 
one question involving a calculation and a talking calculator will be provided, although applicants are 
recommended to bring their own. The oral exam will yield a possible 20 points. 

(G) The interview part will consist of a variety of questions in a give and take format. Each member of the 
Interview Committee will evaluate the applicant's response to the interview questions and will award up to ten 
points at his/her discretion. The interview part must include the following elements: a review of the 
applicant's net profit percentage and statement of revenues and expenses for the past 12 months; a comparison 
of the applicant's performance to various statewide averages such as average gross and net profit percentages, 
salary costs, sales per hours open, sales per building population, etc.; two "philosophy of business" type 
questions designed to promote a general discussion and allow the Interview Committee the opportunity to 
evaluate the applicant's experience, maturity, expertise, and ability; a discussion of work experience outside 
of the Business Enterprises Program. Since points are awarded for seniority, time in the Business Enterprises 
Program will not be considered as a reason to award pwints; however, relevant work experience in the Business 
Enterprises Program may be discussed and taken into consideration. Applicants are encouraged to bring letters 
of recommendation, certificates, and other documents that would aid the Interview Committee in awarding its 
discretionary points. 

(H) Each interviewer will award discretionary points individually and the total score of Oral Exam and Interview 
points from each interviewer will be averaged and added to the applicant's points from the other Sections. 

(6) Licensees and trainees: 

(A) A licensee who has no previous exjjerience in the North Carolina Business Enterprises Program will be assigned 
35 points in the Financial Analysis/Operating Standards category. While a trainee is in training, he will be 
graded on sanitation at the Rehabilitation Center and at each on-the-job training site to compile a training 
sanitation grade for use in assigning points in the sanitation category. 

(B) A licensee with previous Business Enterprises experience will be assigned 35 points in the Financial 
Analysis/Operating Standards category. Previous sanitation records will be considered, if available. If no 
previous sanitation records are available, the applicant has the option of taking the Food Service Sanitation Test 
offered by the Rehabilitation Center or through the Business Enterprises Program. If the licensee scores a 90% 
or above on the test, he will be given three points in the Sanitation Section. 

(C) Applicants must have satisfactorily completed Level I training or have a Level I license to be interviewed. 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1711 



PROPOSED RULES 



(7) Maximum Point Scale: 

FAOS Performance 
Interview 
Sanitation 
Seniority 
Customer relations 



95 

An applicant must score at least 60 total points to be awarded a location. 

Statutory Authority G.S. 111-27; 1438-157; 20 U.S.C. sec. 107a et seq. , as amended. 



OPERATOR 


LICENSEE 


50 


36 35 


30 


30 


10 


10 


5 


5 


up to minus 





10 points 





75 



SECTION .0400 - ADMINISTRATIVE APPEAL 
PROCEDURE 

.0408 PURPOSE 

The purpose of the administrative appeal procedure is to 
provide a means of appeal to each liconsod operator opera- 
tor/licensee who is dissatisfied with an action of the division 
arising from the operation or administration of the conces- 
sion stand program. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.4; 34 
C.F.R. 395.13; 20 U.S.C. sec. 107a et seq., as amended. 

.0409 POLICY 

(a) Every operator operator/licensee has the right to 
present a problem or appeal free from interference, re- 
straint, coercion, discrimination, or reprisal. This policy 
shall be covered fully during orientation procedures for new 
operators, operators/licensees. 

(b) When presenting an appeal, an op e rator opera- 
tor/licensee may be accompanied by a person or persons of 
his choice. 

(c) The filing of a complaint with the division shall 
Indicate consent by the blind operator operator/licensee for 
the release of such information as is necessary for the 
conduct of the administrative appeal. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.4; 34 
C.F.R. 395.13; 20 U.S.C. sec. 107a through 107f as 
amended. 

.0410 PROCEDURE 

(a) The op e rator operator/licensee shall discuss the 
problem with the division staff person taking the action with 
which the op>erator operator/licensee is dissatisfied and 
request specific action in writing to resolve the grievance . 
This discussion must be held within 15 working days of the 
occurrence of the action challenged by the operator opera- 
tor/licensee . The operator operator/licensee will receive a 
response within five working days following the discussion. 
Any decision made by agency personnel at this step is 
subject to supervisory review and approval. 

(b) If the complaint is not resolved and the operator 



operator/licensee is not satisfied with the outcome of 
Paragraph (a) of this Rule, he has 15 working days to ask 
for a review by the concession stand operator relations 
committee in writing . Within five working days after 
asking for a review, the op e rator operator/licensee will be 
notified of the date of the hearing, which must be held 
within 25 working days after the operator's opera- 
tor's/licensee's request for a hearing. The committee will 
render its decision within 20 working days after the hearing. 

(c) If the decision reached in step (b) of this Rule is not 
satisfactory to the operator operator/licensee or the division 
staff person responsible for the initial action, the matter may 
be referred by the operator operator/licensee or the division 
staff person to the director of the division. Any request for 
review shall be submitted within 15 working days after the 
concession stand operator relations committee has presented 
its recommendation. The party requesting the referral shall 
provide a written summary of the specific facts of the 
complaint and request for specific action to resolve the 
grievance, copies of which shall be provided at the same 
time to all other parties concerned. The director will make 
the decision for the division within 15 working days, and his 
decision will be announced immediately to all parties 
concerned. 

(d) If the complaint is not resolved and the op e rator 
operator/licensee is not satisfied with steps (a) through (c) 
of this Rule, then the operator operator/licensee may file a 
complaint with the division requesting a full evidentiary 
hearing: 

(1) If a blind operator operator/licensee requests a 
full evidentiary hearing, such request must be 
made within 15 working days after any adverse 
decision rendered through the procedures in this 
Rule. 

(2) A blind opwrator operator/licensee must request 
a full evidentiary hearing in writing. This 
request must be transmitted to the director of the 
division personally or by certified mail, return 
receipt requested. This request may be transmit- 
ted through the o ommitt ee on th e s tand program 
Elected Committee of Vendors in accordance 
with Section 395. 14(1)){2) of the 
Randolph-Sheppard regulations. This hearing 



1712 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



shall be held in accordance with Article 3 of 
Chapter 150B of the North Carolina General 
Statutes, to the extent that such article does not 
conflict with these regulations pertaining to 
grievance procedures or any federal law or 
regulation. 

(3) A blind op e rator operator/licensee is entitled to 
legal counsel or other representation in a full 
evidentiary hearing; reasonable costs of such 
legal counsel may be shared or funded by the 
division, if the operator operator/licensee is 
unable to obtain such services at his own ex- 
pense. 

(4) Reader services or other communication services 
shall be arranged for the blind operator opera- 
tor/licensee should he so request. Transporta- 
tion costs and per diem shall be provided also to 
the blind operator operator/licensee during the 
pendency of the evidentiary hearing, if the 
location of the hearing is in a city other than the 
legal residence of the operator operator/licensee. 

(5) The hearing shall be held at a time and place 
convenient and accessible to the blind op e rator 
operator/licensee requesting a full evidentiary 
hearing. The blind operator operator/licensee 
shall be entitled to have the hearing held in the 
county of his residence unless he waives this 
right. A hearing held during regular division 
working hours will be deemed among the conve- 
nient times. The hearing shall be scheduled by 
the division within 15 working days of its receipt 
of such a request, unless the division and the 
blind operator operator/licensee mutually, in 
writing, agree to some other period of time. 
The blind op e rator operator/licensee shall be 
notified in writing of the time and place fixed 
for the hearing and of his right to be represented 
by legal or other counsel. TTie blind operator 
operator/licensee shall be provided a copy of the 
hearing procedures and other relevant informa- 
tion necessary to enable him to prepare his case 
for the hearing. 

(6) The presiding officer at the hearing, to be 
apf)ointed by the Secretary of the Department of 
Human Resources, shall be an impartial and 
qualified official who has no involvement either 
with the division action which is at issue in the 
hearing or with the administration or operation 
of the Randolph-Sheppard concession stand 
program. 

(7) The presiding officer shall conduct a full eviden- 
tiary hearing, avoid delay, maintain order, and 
make sufficient record of the proceedings for a 
full and true disclosure of the facts and issues. 
To accomplish these ends, the presiding officer 
shall have all powers authorized by law and may 
make all procedural and evidentiary rulings 



(8) 



(9) 



(10) 



(11) 



(12) 



necessary for the conduct of the hearing. The 
hearing shall be open to the public unless the 
presiding officer for good cause shown other- 
wise determines. 

Both the blind operator operator/licensee and the 
division are entitled to present their case by oral 
or documentary evidence, to submit rebuttal 
evidence and to conduct such examination and 
cross-examination of witnesses as may be re- 
quired for a full and true disclosure of all facts 
bearing on the issue. 

All papers and documents introduced into evi- 
dence at the hearing shall be filed with the 
presiding officer and provided to the other 
party. All such documents and other evidence 
submitted shall be open to examination by the 
parties, and opportunities shall be given to refute 
facts and arguments advanced on either side of 
the issues. 

A transcript shall be made of the oral evidence 
and shall be made available to the parties. TTie 
division shall pay all transcript costs and shall 
provide the blind operator operator/licensee with 
at least one copy of the transcript. 
The transcript of testimony, exhibits, and all 
papers and documents filed in the hearing shall 
constitute the exclusive record for decision. 
The decision of the presiding officer shall set 
forth the principal issues and relevant facts 
adduced at the hearing, and the applicable 
provisions in law, regulation, and the agency 
policy. It shall contain findings of fact and 
conclusions with respect to each of the issues, 
and the reasons and basis therefor. The decision 
shall also set forth any remedial action necessary 
to resolve the issues in dispute. The decision 
shall be made within 15 working days after the 
receipt of the official transcript. The decision 
shall be mailed promptly to the blind op e rator 
operator/licensee and the division. 

(e) If the dispute(s) is not resolved to the satisfaction of 
a blind op e rator operator/licensee after provision of a full 
evidentiary hearing, an appeal may be made to the Secretary 
of the Department of Education for the convening of an 
arbitration panel. 

(f) The results of the arbitration shall be considered the 
final agency action and the op e rator operator/licensee shall 
have exhausted his administrative remedies. 

Statutory Authority G.S. 111-27; 143B-157; 20 U.S.C. sec. 
107a through 107f as amended. 

SECTION .0500 - ELECTION: ORGANIZATION 

AND FUNCTIONS OF THE COMMITTEE ON THE 

STAND PROGRAM 

.0504 ELECTION 



10.16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1713 



PROPOSED RULES 



The division will provide for biennial election among the 
operators in the program to elect a state committee of blind 
operators called the Committoo on tho Stand Program 
Elected Committee of Vendors . This oommittoe Elected 
Committee of Vendors will be representative of all operators 
on the basis of factors such as geography and concession 
stand type, and will be proportionally representative of 
operators on federal and other property. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.14; 20 
II. S. C. sec. 107a et seq. , as ame ruled. 

.0509 ORGANIZATION A>fD OPERATION 

(a) The officers of the oommitto e Elected Committee of 
Vendors will be a chairman and a vice-chairman; they will 
be elected by the committoo Elected Committee of Vendors 
from among committoo Elected Committee of Vendors 
members. 

(b) Vacancies in any of the elective offices will be filled 
by the committoo Elected Committee of Vendors members 
for the unexpired term. 

(c) The chairman will preside over all the meetings of the 
committ ee Elected Committee of Vendors . He will appoint 
subcommittees at such time as the business of the committoo 
Elected Committee of Vendors may warrant, except for the 
Concession Stand Operator Relations Committee which shall 
be elected by the committ ee on th e Stand Program Elected 
Committee of Vendors from its members. The chairman 
shall appoint temporary replacements to this subcommittee 
as needed to fill any vacancy until a new member may be 
elected. He may also appoint a temporary replacement for 
any Concession Stand Operator Relations Committee 
member who has filed an appeal and whose appeal is 
pending before the Concession Stand Operator Relations 
Committee. TTie chairman shall serve as non-voting ex 
officio member of all subcommittees. 

(d) In the absence or disability of the chairman, the 
vice-chairman will assume all the duties of the chairman. 

(e) The meetings will be conducted according to Roberts 
Rules of Order. 

(f) A majority will constitute a quorum. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.14; 20 
U.S.C. sec. 107a et seq., as amended. 

.0510 MEETINGS 

The oommitt ee Elected Committee of Vendors will meet 
quarterly and at such other times, as may be called by the 
chairman, with the consent of a majority of the committoo 
Elected Committee of Vendors at the request of the division. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.14; 20 
U.S.C. sec. 107a et seq., as amended. 

.0511 FUNCTIONS 

(a) The Elected Committee of Vendors committoo on tho 
stand program will actively participate with the division in 



major administrative decisions and policy and program 
development decision affecting the overall administration of 
the concession stand program. 

(b) The committoo Elected Committee of Vendors will 
receive and transmit to the division appeals at the request of 
the operators and serve as advocates for such operators in 
connection with such appeals. 

(c) The committoo Elected Committee of Vendors will 
actively participate with the division in the development and 
administration of a system for the transfer and promotion of 
operators. 

(d) TTie committoo Elected Committee of Vendors will 
actively participate with the division in the development of 
training and retraining programs for operators. 

(e) The oommitt e o Elected Committee of Vendors will 
sponsor, with the assistance of the division, meetings and 
instructional conferences for the operators in the concession 
stand program. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.14; 20 
U.S.C. sec. 107a et seq. , as amended. 

.0512 SUBCOMMTTTEES 

Between regular meetings of the committoo Elected 
Committee of Vendors , it will carry on its functions through 
the following subcommittees: 

(1) concession stand operator relations committee, 
whose functions are to receive and transmit ap- 
peals at the request of operators and serve as 
advocates for such operators in connection with 
such appeals; 

(2) committee on transfer and promotion of operators, 
whose function is to actively participate with the 
division in the development and administration of 
a system for the transfer and promotion of opera- 
tors; 

(3) committee on training and retraining, whose 
functions are to actively participate with the 
division in the development of training and re- 
training programs and to assist the division in 
sponsoring meetings and instructional conferences 
for the operators. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.14; 20 
U. S. C. sec. 107a et seq. , as amended. 

SECTION .0600 - RESPONSIBILITIES 
OF LICENSED OPERATORS 

.0602 HOURS OF OPERATION 

(a) The operator will be responsible for having the 
concession stand open for business on the days and during 
the hours specified in the permit. 

(b) After a reasonable period of time as determined by 
the division, during which the division will work with the 
stand operator operator in developing a list of qualified 
relief workers, the operator will assume the responsibility 



1714 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



for securing a relief worker to work in his stand whenever 
the operator must be absent. Visually impaired persons 
should be given priority over all other persons hired by the 
operator. 

(c) If an operator transfers to another location, or a new 
operator enters the program, the division will again develop 
with the operator a new or revised list of qualified relief 
workers. 



143B-157; 34 C.F.R. 395.7; 20 
, as amended. 



Authority G.S. 111-27; 
U. S. C. sec. 107a et seq. 

.0604 REPORTS 

The stand operator operator has twe four options for 
reporting revenues and expenses: 

(4^ TTio operator may furnish to tho division all 

invoices, — deposit — slips, — repair — bills, — or other 
dooumonto according to the ooh e dul e of th e buei 
noDo e nt e rpris e s' accounting offic e ; 

{_!} The operator may send all invoices, deposit slips, 
repair bills, and other documents to the Division 
including overcash according to a schedule estab- 
lished by the Division's Accounting Office. All 
payroll functions are performed by the Division. 

(3^ Tho operator may koop his paid invoices and 

oubmit to tho accounting offic e a written monthly 
r e port of oaoh purchao e o and oxponooo paid. — The 
operator must organize and maintain invoices by 
month and have thom available for audit. 

£2} The operator retains sales and deposit documenta- 
tion and sends a summation of his purchases for 
resale and all expenses paid out of the facility to 
the Division monthly along with overcash. All 
payroll functions are performed by the Division. 

(3) The operator can perform all functions as in item 
two above and perform his own payroll functions. 

(4) The operator performs all functions of items two 
and three above and calculates their own profit 
and loss statement and sends only the set-aside due 
to the Division. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395; 20 
U.S.C. sec. 107a et seq. , as amended. 

SECTION .0700 - EARNINGS: FUNDS: 
ANfD PROCEEDS 

.0702 SET-ASIDE 

(a) "Set-aside" and "Net Proceeds" is used as defined in 
34 CFR 395.1. 

(b) The division will set aside no mor e than a total of 
tv i 'onty percent of tho funds from the net proceeds of each 
stand operation to be used for the following purposes: 

(1) maintenance and replacement of equipment; 

(2) purchase of new equipment; 

(3) management services; 

(4) assuring a minimum return to operators; 



(5) the operators may use part of the set-aside for 
the establishment and maintenance of retirement 
or pension funds, health insurance contributions, 
and provisions for paid sick leave and vacation 
time, if it is so determined by a majority vote of 
blind operators licensed by the division, after the 
division provides to each operator information 
on all matters relevant to the proposed purposes. 
Tho p>orcontago, to bo dotorminod in advance, 
will var^' from facility' to faoilit)' d e p>ending upon 
th e natur e and ooop e of the accounting oer . 'iooQ 
rondorod by tho Division of Sorvioos for tho 
Blind to tho individual facility. 

(c) The charges in this Rule have been determined on the 
basis of records or expenditures made for each of these 
purpwses over a reasonable period of time with allowances 
for reasonable charges for improving services, fluctuations 
in costs, and for program expansion. In accordance with 34 
CFR 395.9, the method of determining the charges in this 
Rule has been determined by active participation of the 
committee on the stand program. 

(d) The set-aside shall not exceed an amount determined 
to be reasonable by the Commissioner of the Rehabilitation 
Services Administration. 

(e) Any set-aside collected Ln excess of the amount 
needed to cover the purposes in this Rule and in excess of 
any reasonable reserve necessary to assure that such 
purposes can be achieved on a consistent basis, will be 
refunded on a pro rata basis at the end of the fiscal year. 

Authority G.S. 111-12.5; 111-13; 111-27; 111-50; 143B- 
157; 34 C.F.R. 395.8; 34 C.F.R. 395.9; 20 U.S.C. sec. 
107a et seq. , as amended. 

.0703 DISTRIBUTION OF PROCEEDS 

(a) The monthly income of the operator shall be the net 
profits of the concession stand for that month, less the funds 
which must be set aside. 

(b) When the financial statements are completed at the 
end of each fiscal year, any differences between the net 
proceeds actually earned for the year and the amount of net 
proceeds paid during the year will be reconciled. If at the 
end of the year there is a net operating balance above what 
has already been paid to the operator, the operator will 
receive that balance. If, on the other hand, net proceeds 
received by the operator during the year exceed the net 
operating balance as reflected on the closing financial 
statements for the year, this overpayment will be deducted 
from the net proceeds earned during the next fiscal year 
before any net proceeds for that year are paid. 

(©) — In th e e v e nt that more than on e lic e ns e d op e rator is 
under contract to oporato tho same stand, not proceeds will 
bo distributed as follow s : — Tho manager of a concossion 
stand location, as d e signat e d by th e division, will receive a 
p e rc e ntag e of th e n e t prooeoda earned by that s tand as 
dotorminod by tho director of tho division aftor con s ultation 
with tho committoo on tho s tand program. — Tho remaining 



10:16A 



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November 15, 1995 



1715 



PROPOSED RULES 



porcontago will bo divided equally among all liconscd 
oparatoro, including th e monagor, und e r oontraot at that 
looation. 

(c_i (^ An operator whose license has been suspended 
will not receive net proceeds generated during that period of 
time the license was suspended. 

Authority G.S. 111-27; 143B-157; 34 C.F.R. 395.4; 20 
U.S. C. sec. 107a et seq. , as amended. 



««*«««*«*»«* 



* « * « » 



733-3364 or TDD (919) 733-5924. In addition, a fiscal note 
is available upon written request fi-om the same address. 

Fiscal Note: Rules 10 NCAC 20C .0205 and .0316 affect 
the expenditure or distribution of State funds subject to the 
Executive Budget Act, Article 1 of Chapter 143. The 
remainder of the rules do not affect state or local govern- 
ment funds. 

CHAPTER 20 - DIVISION OF VOCATIONAL 
REHABILITATION SERVICES 



Notice is hereby given in accordance with G.S. 
1508-21. 2 that the Department of Human Resources - 
Division of Vocational Rehabilitation Services intends to 
amend rules cited as 10 NCAC 20A .0102; 20B .0204 - 
.0206, .0208 - .0210, .0218. .0222. .0224, .0226 - .0227; 
20C .0205 and .0316. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conduaed at 6:00 pm on Novem- 
ber 30, 1995 at the Main Conference Room, Division of 
Vocational Rehabilitation Services, 805 Ruggles Drive, 
Dorothea Dix Campus, Raleigh, NC. 

Reason for Proposed Action: 

10 NCAC 20A .0102 - is being amended to add a definition 
of the "Division 's Modification Re\'iew Committee ". 
10NCAC20B .0204 - .0206, .0208 - .0210, .0218, .0222, 
.0224, .0226 - .0227 - are being amended to clarify that the 
state plan includes the State Plan for Independent Living 
Services and to indicate that certain duties related to the 
appeals process, which were previously performed by the 
Division 's Deputy Director, will now be performed by the 
Head of Casework Services as the Division no longer has a 
Deputy Director position. 

10 NCAC 20C .0205 - is being amended to exempt addi- 
tional services from the financial needs test and to make 
editorial changes in the language regarding individuals with 
disabilities. 

10 NCAC 20C .0316 - is being amended to raise the amount 
allowed for residence modifications; to clarify requirements 
regarding modifications to mobile homes and vehicles; to 
establish requirements for the Division 's participation in the 
purchase of a vehicle for modification purposes; and to 
indicate the role of the Division 's Modification Review 
Committee in these processes. 

Comment Procedures: Comments may be presented orally 
or in writing at the hearing. Oral statements may be limited 
at the discretion of the hearing officer. Written comments 
may also be submitted until December 15, 1995 to Jackie 
Stalnaker, Division of Vocational Rehabilitation Services, 
PO Box 26053, Raleigh. NC 27611. To obtain additional 
information or indicate need for alternative communication 
format contaa Ms. Stalnaker in writing or by phone (919) 



SUBCHAPTER 20A - GENERAL INFORMATION 

SECTION .0100 - INFORMATION REGARDING 
RULES 

.0102 DEFIMTIONS 

As used in this Chapter, the following terms have the 
meaning specified: 

(1) "Division" means the Division of Vocational 
Rehabilitation Services of the Department of 
Human Resources. 

(2) "Division Director" or "Director" means the 
Director of the Division of Vocational Rehabilita- 
tion Services. 

(3) "Division's Modification Review Committee" 
means a committee of Division staff from the 
State office appointed by the Division Director and 
chaired by the Head of Casework Services to 
review for approval or disapproval: 

(a) amounts for residence, vehicle or job site modi- 

fications that exceed standard amounts specified 
in 10 NCAC 20C .0316: and 

(h) purchase of vehicles as set forth in 10 NCAC 
20C .0316. 

(4) f3^ "Functional Capacity" means the ability to 
perform in the following areas: 

(a) communication; 

fb) interpersonal skills; 

(c) mobility; 

(d) self-care; 

(e) self-direction; 

(f) work skills; and 

(g) work tolerance. 

(5) f+) "Individual with a severe disability" has the 
meaning sjjecified in P.L. 102-569, Section 7(15) 
which is incorporated by reference. 

(6) f§^ "Individual with the most severe disability" 
means an individual with a severe disability whose 
impairment seriously limits three or more func- 
tional capacities in terms of an employment 
outcome. 

(7) (6) "Permanent disability" means any physical or 
mental condition which is expected to be lasting 
regardless of medical or psychological interven- 
tion, and which is highly unlikely to go into full 



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NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



or permanent remission. 
(8) f?) "Post-employment services" means one or 
more services that are provided subsequent to the 
achievement of an employment outcome and that 
are necessary for an individual to maintain, re- 
gain, or advance in employment, consistent with 
the individual's abilities, capabilities, and inter- 
ests. 
The section of the Public Law incorporated by reference in 
this Rule shall automatically include any later amendments 
thereto as allowed by G.S. 150B-21.6. Copies of the 
section of the Public Law so incorporated may be obtained 
at no cost from the Division. 

Authority G.S. ] 43-545; ] 43-546; 150B-21.6; P.L. 102-569, 
s. 7(15) and s. 101(a)(5)(A); 34 C.F.R. Part 363. 

SUBCHAPTER 20B - PROCEDURE 

SECTION .0200 - CONTESTED CASES: 

ADMINISTRATIVE REVIEWS: 

APPEALS HEARINGS 

.0204 DIVISION ACTIONS IN RESPONSE TO 
REQUEST 

(a) Upon receipt of a request for an appeals hearing, the 
regional director shall immediately forward the original 
request to the Division's deputy director Head of Casework 
Services for appointment of a hearing officer to conduct the 
appeals hearing. 

(b) If the individual has requested an administrative 
review in addition to an appeals hearing, the regional 
director shall: 

(1) make a decision to conduct the administrative 
review or appoint a designee to conduct the 
administrative review who: 

(A) has had no previous involvement in the issues 
currently in controversy; 

(B) can conduct the administrative review in an 
unbiased way; and 

(C) has a broad working knowledge of the Divi- 
sion's policies and procedures and the State 
Plan for Vocational Rehabilitation Services or 
Independent Living Services (as appropriate) 
(atato plan) ; and 

(2) proceed with, or direct the designee to proceed 
with, an administrative review according to the 
provisions of Rules .0205, .0208, and .0209 of 
this Section. 

(c) The regional director shall send the applicant or client 
written acknowledgment of receipt of the request and inform 
the individual that additional information will be sent 
regarding the administrative review and/or appeals hearing. 

(d) The regional director shall provide the Client Assis- 
tance Program with a copy of the request and the response 
to the request. 



Authority G.S. 143-546; 143B-10(j); 150B-11; 34 C.F.R. 
361.48. 

.0205 SCHEDULING AND NOTICE OF 
ADMEVISTRATIVE REVIEW 

(a) If an administrative review is to be conducted, the 
regional director or designee shall: 

(1) set a date, time and place for the administrative 
review; 

(2) send written notification by certified mail to the 
applicant or client and the individual's parent, 
guardian or representative, as appropriate, of the 
date, time and place for the administrative 
review at least five days prior to the administra- 
tive review; 

(3) advise the applicant or client in the written 
notice that a hearing officer will be appointed by 
the d e puty dir e ctor Head of Casework Services 
to conduct a hearing if the matter is not resolved 
in the administrative review and that the appli- 
cant or client will also receive a written notice 
from the hearing officer regarding the formal 
appeals hearing which will be held after the 
administrative review; and 

(4) notify the Director of the Client Assistance 
Program (CAP) and other individuals to be 
involved in the administrative review of the 
request and the date, time and place for the 
administrative review. This notification may be 
by phone or in writing. 

(b) Prior to the administrative review, the regional 
director or designee shall review all previous decisions and 
casework related to the applicant or client and seek whatever 
consultation, explanation, documentation, or other informa- 
tion that is deemed necessary, utilizing the Division's CAP 
Director as appropriate. 

Authority G.S. 143-546; 143B-10(j); 150B-11; 34 C.F.R. 
361.48. 

.0206 APPOINTMENT OF HEARING OFFICER 

Upon receipt of the applicant's or client's request for an 
appeals hearing from the regional director, the d e puty 
director Head of Casework Services shall arrange for the 
appointment of an impartial hearing officer who is in the 
pool of persons qualified as defined in P.L. 102-569, 
Section 7(28) and who is mutually agreed upon by the 
Director and the individual or the individual's representa- 
tive. 

Statutory Authority G.S. 143-546; 150B-1; P.L. 102-569. 

.0208 ADMINISTRATIVE REVIEW 

(a) Within 15 days of the original request for an adminis- 
trative review by the applicant or client, the regional 
director or designee shall hold the administrative review 
with the applicant or client; the individual's parent, guardian 



10:16A 



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November 15, 1995 



1717 



PROPOSED RULES 



or representative, as appropriate; the CAP Director, as 
appropriate; and other individuals deemed necessary by the 
regional director or designee. 

(b) Within five working days of the administrative 
review, the regional director or designee shall make a 
decision and notify the applicant or client and others using 
the following procedures: 

(1) compile a written report of the administrative 
review outlining the purposes of the administra- 
tive review, the participants, the decision that 
was reached, and the rationale for the decision; 

(2) send the written report containing the decision to 
the applicant or client by certified mail with 
return receipt requested, with a copy being 
placed in the individual's official case record, 
and copies being forwarded to the doput)' diroc 
tef Head of Casework Services and the CAP 
director; and 

(3) provide instructions to the applicant or client of 
steps that may be taken in response to the deci- 
sion and the deadline for the responses. A form 
indicating agreement with the decision and 
requesting that the hearing be canceled shall be 
included for the applicant's or client's signature 
if the individual agrees with the decision. 

Authority G.S. 143-546; 143B-10{j); 150B-11; 34 C.F.R. 
361.48. 

.0209 RESPONSE TO ADMINISTRATIVE 
REVIEW DECISION 

(a) If the applicant or client is satisfied with the decision 
resulting from the administrative review, the individual shall 
sign the form described in Rule .0208fb)(3) of this Section 
and submit it to the regional director within five days of 
receipt of the decision. The regional director shall inform 
the doput)' director Head of Casework Services of the 
request to cancel the hearing immediately and forward the 
form to the doput)' director Head of Casework Services who 
shall submit it to the hearing officer. 

(b) If the hearing officer does not receive a written 
request from the applicant or client that the hearing be 
canceled, the hearing shall be conducted as scheduled unless 
negotiations produce a settlement that is satisfactory to both 
parties prior to the hearing. 

(c) If the hearing is canceled, the hearing officer shall 
send the applicant or client and the Division written notice 
of the cancellation in the same manner as required for notice 
of the hearing in Rule .0207(d) of this Section. A copy of 
the notice of cancellation shall be sent to the Client Assis- 
tance Program. 

Authority G.S. 143-546; 143B-10(j); 1503-11; 34 C.F.R. 
361.48. 

.0210 ADMINISTRATIVE REVIEW BY HEAD 
OF CASEWORK SERVICES 



In situations where the issue currently in controversy 
involves action taken by the central office of the Division, 
the d e put)' dir e ctor Head of Casework Services or a 
designee of the doputy director Head of Casework Services 
shall be responsible for the duties prescribed for the regional 
director in these rules. 

Authority G.S. 143-546; 143B-10(j); 150B-11; 34 C.F.R. 
361.48.' 

.0218 DISQUALmCATION OF HEARING OFHCER 

(a) If at any time the hearing officer believes he or she 
carmot conduct the hearing in a fair and impartial manner, 
the hearing officer shall submit to the d e put)' dir e ctor Head 
of Casework Services a written statement indicating why he 
or she should be disqualified from the case. Submission of 
the statement shall disqualify the hearing officer. The 
d e puty director Head of Casework Services shall inform all 
parties of the disqualification and the reasons therefor. 

(b) If a party to the case believes that the hearing officer 
of record cannot conduct the hearing in a fair and impartial 
manner, the party shall submit an affidavit to the hearing 
officer for consideration. The hearing officer shall deter- 
mine the matter as part of the record in the case, and this 
determination shall be subject to judicial review at the 
conclusion of the proceeding. 

(c) When a hearing officer is disqualified or it is imprac- 
ticable for the hearing officer to proceed with the hearing, 
another hearing officer shall be assigned by the deputy 
dir e ctor Head of Casework Services to proceed with the 
case. However, if it is shown to the d e put)' dir e ctor Head 
of Casework Services or the newly assigned hearing officer 
that substantial prejudice to any party will result from 
continuation of the case then either: 

(1) the case shall be dismissed without prejudice; or 

(2) all or part of the case shall be repeated as neces- 
sary to substantially prevent or substantially 
remove the prejudice. TTie d e put)' director Head 
of Casework Services shall promptly inform all 
parties of the decision to assign a new hearing 
officer, that the case has been dismissed without 
prejudice, or that all or part of the case is to be 
repeated. Such notification shall include a 
statement of the reasons for the decision. 

Authority G.S. 143-546; 143B-10(J); 150B-11; 34 C.F.R. 
361.48. 

Mil FAILURE TO APPEAR 

(a) If the applicant or client fails to appear at the hearing 
and does not have a representative present, the hearing 
officer shall cancel the hearing. 

(b) The applicant or client may submit a written request 
for rescheduling of the hearing to the doputy dir e ctor Head 
of Casework Services . The request shall provide an 
explanation of the individual's failure to appear at the 
hearing or to have a representative present. The deputy 



1718 



NORTH CAROLINA REGISTER 



November 15, 1995 10: 16 A 



PROPOSED RULES 



diroctor Head of Casework Services may instruct tiie 
hearing officer to reschedule the hearing upon a showing of 
good cause by the applicant or client. 

Authority G.S. 143-546; 143B-10(j); 150B-11; 34 C.F.R. 
361.48. 



.0224 DIVISION DIRECTOR'S REVIEW A>fD 
FINAL DECISION 

(a) The Division Director may review the hearing 
officer's decision and render the final decision. 

(b) The Division Director's decision to review the hearing 
officer's decision shall be based on the following standards 
of review: 

(1) Is the hearing officer's decision arbitrary, capri- 
cious, an abuse of discretion, or otherwise 
unreasonable? 

(2) Is the hearing officer's decision supported by 
substantial evidence, i.e., consistent with facts 
and applicable federal and state policy? 

(3) In reaching the decision, has the hearing officer 
given appropriate and adequate interpretation to 
such factors as: 

(A) the federal statute and regulations as they 
apply to specific issue(s) in question; 

(B) the state plan as it applies to the specific 
issue(s) in question; 

(C) division procedures as they apply to the spe- 
cific issue(s) in question; 

(D) key portions of conflicting testimony; 

(E) division options in the delivery of services 
where such options are permissible under the 
federal statute; 

(F) restrictions in the federal statute with regard to 
such supportive services as maintenance and 
transportation; and 

(G) approved federal or division policy as it relates 
to the issue(s) in question. 

(c) If the Division Director decides to review the hearing 
officer's decision, the Director shall send the written 
notification and allow the submission of additional evidence 
as required by 34 C.F.R. 361.48(c)(2)(iv) and (vii). The 
written notification shall be given to the applicant or client 
personally or by certified mail. If given by certified mail, 
it shall be deemed to have been given on the delivery date 
appearing on the return receipt. 

(d) Upon a determination to review the hearing officer's 
decision, the Division Director shall make the final decision 
and provide the written report thereof as required by 34 
C.F.R. 361.48(c)(2)(viii) and (ix). The division director 
shall not overturn or modify a decision, or part of a deci- 
sion, of an impartial hearing officer that supports the 
position of the individual except as allowed under P.L. 
102-569, Section 102(d)(3)(C). The final decision shall be 
given to the applicant or client personally or by certified 
mail. If given by certified mail, it shall be deemed to have 
been given on the delivery date appearing on the return 



receipt. 

(e) The hearing officer's decision shall be the final 
decision under the conditions specified in 34 C.F.R. 
361.48(c)(2)(v). 

(f) The Division Director shall forward a copy of the 
final decision, whether issued under (d) or (e) of this Rule, 
to the d e put)' diroctor Head of Casework Services, the CAP 
director, the regional director, and the applicant's or client's 
representative, as appropriate. A copy shall also be in- 
cluded in the individual's official case record. 

Authority G.S. 143-546; 150B-1; P.L. 102-569, s. 102(d); 
34 C.F.R. 361.48. 

.0226 RECORD 

(a) The official records of appeals hearings shall be 
maintained in the central office of the Division. 

(b) Any person wishing to examine a hearing record shall 
submit a written request to the deputy director Head of 
Casework Services in sufficient time to allow the record to 
be prepared for inspection, including the removal of any 
confidential material. 

Authority G.S. 143-546; 143B-10(j); 150B-11; 34 C.F.R. 
361.48. 

mil TRANSCRIPTS 

Any person desiring a transcript of all or part of an 
appeals hearing shall contact the office of the deputy 
dir e ctor Head of Casework Services . A fee to cover the 
cost of preparing the transcript shall be charged, and the 
party may be required to pay the fee in advance of receipt 
of the transcript. The transcript may be edited to remove 
confidential material. 



Authority G.S. 
361.48. 



143-546; 143B-10(j); 150B-11; 34 C.F.R. 



SUBCHAPTER 20C - PROGRAM RULES 



SECTION .0200 - ELIGIBILITY 



.0205 



SERVICES COVERED BY OR EXEMPT 
FROM FINANCIAL NEEDS TEST 

(a) The financial need of a client, as determined by the 
financial needs test specified in Rule .0206 of this Section, 
shall apply as a condition for furnishing the following 
vocational rehabilitation services to clients eligible for 
services or to clients eligible for extended evaluation: 
(1) physical and mental restoration; 

maintenance; 

transportation; 

occupational license; 

tools, equipment, and initial stock (including 

livestock), supplies and necessary shelters in 

connection with these items; 

books, training supplies, and materials required 



(2) 
(3) 
(4) 
(5) 



(6) 



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NORTH CAROLINA REGISTER 



November 15, 1995 



1719 



PROPOSED RULES 



for courses in jX)st-secondary educational facili- 
ties; 

(7) services to members of the a handioapp e d indi- 
vidual's family necessary to the adjustment or 
rehabilitation of the handicappod individual with 
disabilities ; 

(8) telecommunications, sensory, and other techno- 
logical aids and devices; 

(9) recruiting and training to provide new employ- 
ment opportunities in rehabilitation, health, 
welfare, public safety, law enforcement, and 
other public service employment; 

(10) post-employment services necessary to assist 
handioapp e d individuals with disabilities in 
maintaining suitable employment (other than 
those services in Paragraph fb) of this Rule 
which are provided without regard to financial 
need); and 

(11) other goods and services expected to benefit a 
handicappod an individual with disabilities in 
obtaining employment or achieving the individ- 
ual's independent living goals . 

(b) The financial needs test shall not apply as a condition 
for furnishing the following: 

(1) services exempt from the financial needs test 
under 34 C.F.R. 361.47; 

(2) interpreter services for the deaf and foreign 
language interpreter/translator services for 
individuals who are unable to understand either 
verbal or written information presented by the 
Division ; 

(3) notetaker services for individuals enrolled in 
post-secondary training programs; 

(4) (S) tuition for: 

(A) on-the-job training; 

(B) community rehabilitation program training; 

(C) community college/college parallel programs 
up to the catalog rate; 

(D) vocational training at: 

(i) community college vocational programs up 
to the catalog rate; and 

(ii) proprietary for profit vocational and trade 
schools up to a limit of four thousand 
dollars ($4,000) per training program; and 

(E) post-secondary education up to the maximum 
rate charged for the public university system. 

(5) (4) fees required in post-secondary educational 
facilities up to the maximum rate charged for the 
public university system; and 

(6) f§-) training supplies and materials required for 
training in division-operated facilities and the 
training programs listed in Paragraphs 
(b)f^l4}(A) and (B) of this R«li^ Rule; and 

(7) in addition, for individuals in the independent 
living program, independent living skills train- 
ing, attendant management training, and recre- 
ational therapy when these services are provided 



by staff of the Division's Independent Living 

Program. 
(c) The Division may grant an exception to the rate for 
tuition and required fees for post-secondary education 
specified in Paragraphs (b){3)(41(E) and (b){4)(5} of this 
Rule when necessary to accommodate the special training 
needs of o e v e r e ly — handioapped individuals with severe 
disabilities who must be enrolled in high-cost, special 
programs designed for aovoroly physically handicappod 
students with severe physical disabilities . 

Authority G.S. 143-545; 143-546; 34 C.F.R. 361.40; 34 
C.F.R. 361.41; 34 C.F.R. 361.47; 34 C.F.R. 364.59. 



SECTION .0300 



■ SCOPE A>fD NATURE OF 
SERVICES 



.0316 OTHER GOODS AND SERVICES 

(a) Modifications Modification of a client's residence or 
vehicle is clionta' roaidoncos are limited as follows: 

(1) A limit of ton thousand dollars ($10,000) por 
cli e nt twelve thousand dollars ($12,000) shall be 
placed on modification projects when the resi- 
dence is owned by the client or the client's 
immediate family. 

(2) Modifications to a mobile home owned by the 
client or the client's family which is located on 
land owned by the client or client's family, 
except for those situations where exterior modi- 
fications are not permanently affixed to a parcel 
of rented or leased land and are moveable with 
the mobile home. Mobile homo modifications 
shall not exceed eight thousand five hundred 
dollars ($8,500) per cli e nt, project. Modifica- 
tions to a mobile home not meeting the owner- 
ship and land ownership requirements stated in 
this Paragraph shall not exceed five thousand 
five hundred dollars ($5,500) per project. 

(3) Modifications to rented or leased residences 
shall not exceed five thousand five hundred 
dollars ($5,500) per client project . 

(4) Vehicle modifications shall not exceed six thou- 
sand dollars ($6,000) per client. 

(5) The limitations indicated in Subparagraphs (a)(1) 
through (4) of this Rule apply unless a higher 
amount is needed to meet the cost of unforseen 
structural damage needing repair or adaptive 
equipment and related assistive technology and 
devices necessary: 

(A) to accommodate the individual's degree of 
disability, and 

(B) to enable the individual to complete the reha- 
bilitation program or meet the goals of the 
independent living program. 

Amounts exceeding the limitations must be 
approved by the Division's Modification Review 
Committee. 



1720 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



(b) Job site modifications shall not exceed seven thousand 
dollars ($7,000) per client unless the vocational placement 
requires adaptive equipment which necessitates extensive 
physical site changes that warrant a higher amount which 
must be approved by tho Diroctor the Division's Modifica- 
tion Review Committee (MRC) . 

(c) The Independent Living Program of the Division may 
assist with the modification of a client or family- 
owned/leased-to-purchase vehicle in order to enhance the 
client's ability to function independently in the family or to 
actively participate in the community. The Vocational 
Rehabilitation Program of the Division may assist with the 
modification of a client or familv-owned/leased-to-purchase 
vehicle for employment purposes or to assist a client 
enrolled in a college training program. Other options such 
as public transportation or family assistance shall be used 
when available. The following conditions and limitations 
apply: 

(1) Modifications shall not be considered for clients 
in secondary school programs unless the individ- 
ual is a client of the Independent Living Rehabil- 
itation Program. 

(2) Modifications for postsecondary training may be 
considered only: 

(A) when the client is a full-time student with 
satisfactory grades and personal transportation 
is required as part of the training curriculum; 
or 

(B) when the client must live off campus because 
the college has no^ or only limited, on-campus 
housing. 

(3) The Division shall require an evaluation of any 
used vehicle by a certified mechanic or a dealer- 
ship to verify that the vehicle is in good repair. 
The rehabilitation engineer shall certify that the 
vehicle will accommodate the needed modifica- 



tions. 



£41 



Division ownership of the modifications shall be 

secured through a signed Security Agreement. 

(d) The Vocational Rehabilitation Program may contribute 

to the cost of purchasing a vehicle for modification purposes 

for eligible clients with the most severe disabilities under the 

following conditions and limitations: 

(1) The Program shall not contribute to the purchase 
of more than one vehicle for any individual. 

(2) The Program shall select the most cost effective 
method, based on the recommendation of the 
Rehabilitation Engineer, to secure a vehicle that 
meets the modification requirements of the 
individual. 

(3) The vehicle must be titled to or in the process of 
being purchased through a lease-to-purchase 
arrangement by either the client or the client's 
immediate family. 

(At) The Program shall contribute to the purchase of 
a vehicle only when a vehicle is required to 
accomplish the employment goal of the individ- 



ual which must be at or above the substantial 
gainful activity (SGA) level as defined by Social 
Security Administration. 

(5) A comprehensive review of other financial 
resources must be conducted by the client and 
counselor detailing the plan for purchasing, 
insuring, and maintaining the vehicle. 

(6) The client must contribute a minimum of 50 
percent of the initial purchase cost of the vehi- 
cle. 

(7) All vehicle purchases shall be approved by the 
Modification Review Committee. TTie Modifica- 
tion Review Committee may grant an exception 
to any of the provisions of this Paragraph only 
upon the written recommendation of the appro- 
priate regional director of the Division which 
shall indicate why the exception is needed in 
relation to the individual's particular disability 
and employment goal. 

£e) fe) Other goods and services not specifically men- 
tioned in the rules in this Secfion may be provided to clients 
who are eligible for services if necessary to enable them to 
become employable or, in the case of the Independent 
Living Program, to live independently. The other services 
shall not include the purchase of land or the purchase or 
construction of a building. 

Authority G.S. 143-546; 34 C.F.R. 361.42. 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the DHR/Division of Medical Assistance 
intends to amend rule cited as 10 NCAC 26B .0112; and 
adopt rule cited as 10 NCAC 26B .0113. 
Note: Existing rules 10 NCAC 26B .0113 - .0126 will be 
renumbered to 10 NCAC 26B .0114 - .0127. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 1:30 p.m. on 
December 1, 1995 at the NC Division of Medical Assistance, 
1985 Umstead Drive, Kirby Building, Room 132, Raleigh, 
NC. 

Reason for Proposed Action: 

10 NCAC 268 .0112 - To change the DSM-IU-R manual 
title to the current version DSM-IV. 

10 NCAC 26B .0113 - This is a cost containment measure 
for the Medicaid program. 

Comment Procedures: Written comments concerning these 
rule-making actions must be submitted by December 15, 
1995, to Portia Rochelle, APA Coordinator, Division of 
Medical Assistance, 1985 Umstead Drive, Raleigh, NC 
27603. Oral comments may be presented at the hearing. A 
fiscal note statement is available upon written request from 



I0:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1721 



PROPOSED RULES 



the same address. 

Fiscal Note: These Rules do not affea the expenditures or 
revenues of local government or state funds. 

CHAPTER 26 - MEDICAL ASSISTANCE 

SUBCHAPTER 26B - MEDICAL ASSISTANCE 
PROVIDED 

SECTION .0100 - GENERAL 

.0112 PSYCHIATRIC ADMISSION 

CRITERIA/MEDICAID BENEnCLUlIES 
UNDER AGE 21 

Medicaid criteria for the admission of children and 
adolescents under age 21 to psychiatric hospitals or psychiat- 
ric units of general hospitals is limited herein. To be 
approved for admission, the patient must meet criteria in 
Items (1), (2) and (3) of this Rule as follows: 

(1) Client meets criteria for one or more DSM III R 
DSM-IV (Diagnostic and Statistical Manual of 
Mental Disorders, Third Edition Rovisod Fourth 
Edition — a manual whose purpose is to provide 
clear descriptions of diagnostic categories in order 
to enable clinicians and investigators to diagnose, 
communicate about, study, and treat various 
mental disorders) diagnoses. This manual is 
hereby incorporated by reference including subse- 
quent amendment and editions. Copies may be 
obtained from the American Psychiatric Associa- 
tion 1400 K Street, NW Washington, DC 2000 
tel: 1-800-368-5777 at a cost of Fifty-four dollars 
and ninety-five cents ($54.95) (hard cover); forty- 
two dollars and ninety-five cents ($42.95) (soft 
cover); five dollars ($5.00) s^ and Ir The manual 
is available for inspection at the Division of 
Medical Assistance 1985 Umstead Dr., Raleigh, 
NC; and 

(2) At least one of the following criteria: 

(a) Client is presently a danger to self (e.g., en- 
gages in self-injurious behavior, has a significant 
suicide potential, or is acutely manic). This 
usually would be indicated by one of the follow- 
ing: 
(i) Client has made a suicide attempt or serious 
gesture (e.g., overdose, hanging, jumping 
from or placing self in front of moving vehi- 
cle, self-inflicted gunshot wound), or is threat- 
ening same with likelihood of acting on the 
threat, and there is an absence of supervision 
or structure to prevent suicide of the client 
who has made an attempt, serious gesture or 
threat, 
(ii) Client manifests a significant depression, 
including current contemplation of suicide or 
suicidal ideation, and there is an absence of 



supervision or structure to prevent suicide, 
(iii) Client has a history of affective disorder: 

(A) with mood which has fluctuated to the 
manic phase, or 

(B) has destabilized due to stressors or 
non-compliance with treatment. 

(iv) Client is exhibiting self-injurious behavior 
(cutting on self, burning self) or is threatening 
same with likelihood of acting on the threat; or 

(b) Client engages in actively violent, aggressive or 
disruptive behavior or client exhibits homicidal 
ideation or other symptoms which indicate he is 
a probable danger to others. This usually would 
be indicated by one of the following: 

(i) Client whose evaluation and treatment cannot 
be carried out safely or effectively in other 
settings due to Lmpulsivity, impaired judgment, 
severe oppositionalism, running away, severely 
disruptive behaviors at home or school, 
self-defeating and self-endangering activities, 
antisocial activity, and other behaviors which 
may occur in the context of a dysfunctional 
family and may also include physical, psycho- 
logical, or sexual abuse. 

(ii) Client exhibits serious aggressive, assaultive, 
or sadistic behavior that is harmful to others 
(e.g., assaults with or without weapons, provo- 
cations of fights, gross aggressive 
over-reactivity to minor irritants, harming 
animals) or is threatening same with likelihood 
of acting on the threat. This behavior should 
be attributable to the client's specific 
DSM m R DSM -IV diagnosis and can be 
treated only in a hospital setting; or 

(c) Acute onset of psychosis or severe thought 
disorganization or clinical deterioration Ln condi- 
tion of chronic psychosis rendering the client 
unmanageable and unable to cooperate in treat- 
ment. This usually would be indicated by the 
following: Client has recent onset or aggravated 
psychotic symptoms (e.g., disorganized or 
illogical thinking, hallucinations, bizarre behav- 
ior, paranoia, delusions, incongruous speech, 
severely impaired judgment) and is resisting 
treatment or is in need of assessment in a safe 
and therapeutic setting; or 

(d) Presence of medication needs, or a medical 
process or condition which is life-threatening 
(e.g., toxic drug level) or which requires the 
acute care setting for its treatment. This usually 
would be indicated by one of the following: 

(i) Proposed treatments require close medical 
observation and monitoring to include, but not 
limited to, close monitoring for adverse medi- 
cation effects, capacity for rapid response to 
adverse effects, and use of medications in 
clients with concomitant serious medical prob- 



1722 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



lems. 
(ii) Client has a severe eating disorder or sub- 
stance abuse disorder which requires 
24-hour-a-day medical observation, supervi- 
sion, and intervention, 
(iii) Client has Axis I or Axis II diagnosis, with a 
complicating or interacting Axis HI diagnosis, 
the combination of which requires psychiatric 
hospitalization in keeping with any one of 
these criteria, and with the Axis HI diagnosis 
treatable in a psychiatric setting (e.g., diabe- 
tes, malignancy, cystic fibrosis); or 
(e) Need for medication therapy or complex diag- 
nostic evaluation where the client's level of 
functioning precludes cooperation with the 
treatment regimen, including forced administra- 
tion of medication. This usually would be 
indicated by one of the following: 
(i) Client whose diagnosis and clinical picture is 
unclear and who requires 24 hour clinical 
observation and assessment by a 
multi-disciplinary hospital psychiatric team to 
establish the diagnosis and treatment recom- 
mendations, 
(ii) Client is involved in the legal system (e.g., in 
a detention or training school facility) and 
manifests psychiatric symptoms (e.g., psycho- 
sis, depression, suicide attempts or gestures) 
and requires a comprehensive assessment in a 
hospital setting to clarify the diagnosis and 
treatment needs; and 
(3) To meet the federal requirement at 42 CFR 441. 
152, all of the following must apply: 

(a) Ambulatory care resources available in the 
community do not meet the treatment needs of 
the recipient. 

(b) Proper treatment of the recipient's psychiatric 
condition requires services on an inpatient basis 
under the direction of a physician. 

(c) The services can reasonably be expected to 
improve the recipient's condition or prevent 
fiirther regression so that services will no longer 
be needed. 



sis, or 
(a) The patient has a current 



DSM-IV Axis n 



Authority G.S. 108A-25(b); 108A-54; 
Subpart D; 42 C.F.R. 441.151. 



42 C.F.R. 441, 



.0113 NC MEDICAID CRITERIA FOR CONTINUED 
ACUTE STAY IN AN INPATIENT 
PSYCHIATRIC FACILITY 

The following criteria apply to children and adolescents 
under the age of 21 in a psychiatric hospital or in a psychi- 
atric unit of a general hospital, and to adults aged 21 
through 64 receiving treatment in a psychiatric unit of a 
general hospital. Patient must meet each of the following 
six conditions: 

(1) The patient has a current DSM-IV, Axis I diagno- 



diagnosis and current symptoms/behaviors which 
are characterized by all of the following: 
(i) Symptoms/behaviors are likely to respond 

positively to acute inpatient treatment, 
(ii) Symptoms/behaviors are not characteristic of 

patient's baseline functioning, 
(iii) Presenting problems are an acute exacerbation 
of dysfunctional behavior patterns which are 
recurring and resistive to change. 

(2) Symptoms are not due solely to mental retarda- 
tion. 

(3) The symptoms of the patient are characterized by 
a degree of intensity sufficient to classify at the 
extreme end of a symptom continuum which 
requires continual medical/nursing response, 
management, and monitoring and at least one of 
the following: 

(a) Actively endangers self or others. 

(b) Presents with extreme level of subjective distress 
as indicated by at least one of the following: 

(i) Makes desperate statements. 

(ii) Is significantly unresponsive to environmental 
stimuli. 

(iii) Is unable to meet basic self care needs. 

(iv) Js unwilling to comply with treatment neces- 
sary to address life endangering physiologi- 
cal/medical needs. 

(4) Symptom behavior(s) is presented at least five 
times in a 24 hour period, or limited frequency 
behaviors are associated with lethality, dangerous- 
ness. or destructiveness which endangers self or 
others. 

(5) TTie acute symptoms must be related to factors 
other than weaknesses or problems in patient's 
environmental support system. 

(6) Inpatient care can reasonably be expected to 
improve the patient's condition so that treatment 
can be continued on an outpatient basis or patient 
needs further monitoring and evaluation in a 
hospital as evidenced by one of the following: 

(a) Requires constant, skilled monitoring under the 
direction of a physician, to clarify treatment 
needs which can not be provided in an outpatient 
setting. 

(b) Requires constant, skilled monitoring in a secure 
setting, under the direction of a physician, to 
control behavior or ensure safety which cannot 
be provided in an outpatient setting. 

(c) The patient needs special neurological or bio- 
chemical tests that cannot be performed on an 
outpatient basis. 

Authority G.S. 108A-25(b); 108A-54; 42 CFR 441, Subpart 
D. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1723 



PROPOSED RULES 



****************** 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the DHR - Social Services Commission 
intends to amend rules cUed as 10 NCAC 46A . 0001, . 0005; 
46C .0107; 46D .0101, .0103, .0105 - .0107, .0202; 46E 
.0108 - .0109, .0111; 46F .0107 - .0108, .0110; 46G 
.0110, .0113, .0214; 46H .0101, .0103 - .0105. .0108, 
.0110, .0201, .0203, .0206 - .0207; and repeal rule cited as 
10 NCAC 46H .0202. 

Proposed Effective Date: February 1 , 1996. 

A Public Hearing will be conducted at 10:00 a.m. on 
December 6, 1995 at the Albemarle Building, Room 943-2, 
325 N. Salisbury Street, Raleigh, NC 27603. 

Reason for PropKJsed Action: Some proposed amendments 
reflect technical changes in language or removal of dated 
material. The rest of the proposed changes reflea policy 
changes to promote a more seamless child care delivery 
services, need and income eligibility determination, and 
limitations of service. 

Comment Procedures: Comments may be presented in 
writing any time before or at the public hearing or orally at 
the hearing. All written comments must be received no later 
than December 15, 1995. Time limits for oral remarks may 
be imposed by the Commission Chairman. Any person may 
request copies of these Rules by calling or writing to 
Shamese Ransome, Division of Social Services, 325 N. 
SalLsbury Street, Raleigh, NC 27603 (919) 733-3055. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 46 - DAY CARE RULES 

SUBCHAPTER 46A - roENTffYING 
INFORMATION 

.0001 SCOPE 

(*) — The puqjoso and rosponsibilitios of tho Child Day 
Car e S e ction ar e sp e cifi e d in 10 NCAC 3A. 

fb) TTie rules in this Chapter govern the purchase of child 
day care services with state and federal day care funds 
administered by the Section. Division. 

Statutory Authority G.S. 143B-10; 143B-153; S.L. 1985, c. 
757, s. 155(q). 

.0005 DEFEVmONS 

For the purpose of this Chapter, unless the context of the 
rule clearly indicates a different meaning, the terms listed in 
this Rule are defined as follows: 

(1) "Department" means the Department of Human 
Resources. 



(2) "Secretary" means the Secretary of the Depart- 
ment of Human Resources. 

(3) "Division" means the Division of FaoiIit>' Sor 
viooa. Child Development. 

(4) "Director" means the Director of the Division of 
Facility S e r . 'io » B. Child Development. 

(5) "Sootion" m e ans th e Child Day Car e Section. 
(63 "ChioP means tho Chiof of tho Child Day Caro 

Section. 
f?) £5} "Purchase of Care Program" means the 
administrative, programmatic and fiscal activities 
related to the use of public funds to pay for child 
day care services for children of needy families. 

Statutory Authority 143B-10. 

SUBCHAPTER 46C - PURCHASE OF CHILD DAY 
CARE 

SECTION .0100 - BASIC REQUIREMENTS 

.0107 RATES FOR SUBSIDIZED CARE 

(a) The payment rate for centers in which fewer than 50 
percent of the children enrolled are subsidized with state or 
federal funds shall be the same fee paid by private paying 
parents for a child in the same age group in the same 
center, including registration fees. The payment rate for 
daily transportation provided by these centers is the same 
fee paid by a private paying parent for transportation of a 
child to or from the center. 

(b) Centers in which 50 percent or more of the children 
enrolled are subsidized with state or federal funds may 
choose annually ono of the following option s : 

f4^ th e cantor's paym e nt mt o o for oar e and transpor 

tation for stat e fiscal year 1985 86; or 

f3) tho county market rate for care calculated pursu 

ant to tho annual appropriations act and tho state 
payment rat e for transportation, be paid the rate 
established by the local purchasing agency not to 
exceed the county market rate. 

(c) Facilities, as defined in G.S. 110-86(3), which 
primarily are certified as developmental day centers by the 
Division of Mental Health/Developmental Disabili- 
ties/Substance Abuse Services and serve children who meet 
the definition of special needs set forth in 10 NCAC 46H 
.0110 are exempt from the provisions of Paragraphs (a) and 
(b) of this Rule. Rul e and may choos e armually on e of tho 
following payment options: 

f4^ These facilities may be paid up to the maximum 
rates established by the Division of Mental 
Health/Developmental Disabilities/Substance 
Abuse Services for developmental day centersr 
ef for children with special needs. For typically 
developing children, enrolled in developmental 
day centers, the maximum rate shal l be estab- 
lished by the Division of Mental 
Health/Developmental Disabilities/Substance 



1724 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Abuse Services. This rate shall exclude those 
costs associated exclusively with serving children 
with special needs. 

(3) the contor's allowable unit cost per child ostnb 

lishod annually by tho soction aooording to the 
Divioion of M e ntal H e alth/D e v e lopm e ntal Dio 
abilitioo/Subotanoo Abuo e S e rviooo allowable coot 
policy, and tho rate ostabliahmont procoduros 
approved — by tho socrotar)' — pursuant to G.S. 
113B 153(2a). 

(d) Any approved day care provider who provides care to 
children who meet the definition of special needs set forth 
in 10 NCAC 46H .0110, but who does not primarily serve 
special needs children, may be paid a supplemental rate «p 
to 75% above the provider's approved daily care rate for a 
particular age group and shall bo subjoct to tho following 
conditiono! 

{4^ th e maximum payment rat e shall not oxoood tho 

maximum mt e e stablish e d for d e v e lopm e ntal day 

con tors by the Division &f Montal 

Hoalth/Dovolopmontal Disabilitios/Substanoo 

AbuDO SeP i 'io e s; and 

(3) if the service population of the child day care 
facility or home is comprised of at least 60% 
children without special needs and the facility or 
home provides services to a child or children 
with special needs. The 60% rule does not 
apply to home-based arrangements where the 
number of children enrolled exempts them from 
state regulation. The supplemental rate shall be 
based on actual additional documented costs 
incurred by the provider in serving the child 
with special needs. The costs shall be deter- 
mined by the early intervention specialist, the 
local purchasing agency, and the provider based 
on the plan developed to meet the child's indi- 
vidual needs. 

(e) The reimbursement of additional fees as charged by 
facilities shall be limited to registration fees. Except as 
provided for in Paragraph (a) of this Rule and for facilities 
described in Paragraph (c) of this Rule , the payment rate for 
registration fees shall be limited to t^' e nty dollars ($20.00) 
twenty-five dollars ($25.00) per year f)er child. Registration 
fees may not be paid more than twice per year per child 
regardless of the type of facility. 

(f) Purchasing agencies may negotiate with day care 
center providers for purchase of child day care services at 
payment rates lower than those prescribed by this Rule. 

(g) Child day care services funds shall not be used to pay 
for services provided by the Department of Human Re- 
sources. Division of Mental Health/Developmental Disabili- 
ties/Substance Abuse Services or the Department of Public 
Instruction, Division of Exceptional Children's Services for 
that portion of the service delivery costs which are reim- 
bursed by Division of Mental Health/Developmental 
Disabilities/Substance Abuse Services or Department of 
Public Instruction. 



Statutory Authority G.S. 143B-153(8)a. 

SUBCHAPTER 46D - STATE DAY CARE SERVICES 
FUND 

SECTION .0100 - GENERAL 

.0101 DEFINmON OF FUND 

Tho "Stato "Child Day Care Services Fund" Funding" 
means all state and federal funds appropriated and otherwise 
made available to the Department of Human Resources 
which are administered by the Division of Facility' Sor>'ico9, 
Child Development. Child Day Care Section to purchase or 
provide child day care services for needy families in 
programs which have been approved for participation by the 
section. 

Statutory Authority G.S. 143B-153(2a); S.L. 1985, c. 479, 
s. 95-97. 

.0103 ELIGIBILITY 

(a) Child day care services may be provided to th e targ e t 
populations families demonstrating a need for services as 
defined by one of the reasons for care described in 10 
NCAC 46H .0104. 

(b) Eligibility criteria for child day care services are 
described in 10 NCAC 46H .0200. 

(c) Eligibility for the service is determined by the local 
department of social services or other agency authorized to 
determine eligibility for child day care services under the 
conditions described in 10 NCAC 46H .0207. 

(d) Application for the service is made to the agency 
responsible for determining eligibility as described in 
Paragraph (c) of this Rule. 

(«) — Child day oar e o e r^'io e s provid e d on or after July 1 , 
19 8 6 to children who moot tho eligibility criteria for Child 
Welfare Services funds as provided in the North Carolina 
Divioion of Social — S e rvic e s — Family — S e rs'io e o — Manual, 
Volum e 1 , Chapt e r 1 1 , may b e paid for with state day care 
fund s . 

Statutory Authority G.S. 143B-153(2a). 

.0105 PROGRAM POLICIES AND STANDARDS 

All programs receiving state child day care services fund s 
funding must meet all day care services policies and 
procedures as found in 10 NCAC 46. 

Statutory Authority G.S. 143B-153. 

.0106 ALLOCATION 

Funds are allocated in accordance with procedures 
specified with the appropriation. In the absence of such 
instructions, the funds will be allocated according to 
procedures approved by the oooretar)' Secretary . All 
allocation procedures are kept on file in the section. Divi- 
sion. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1725 



PROPOSED RULES 



Statutory Authority G.S. 143B-153(2a). 

.0107 REIMBURSEMENT 

Reimbursement will be made in accordance with proce- 
dures established by the Secretary of the Department of 
Human Resources. These procedures are specified in Pftft 
6 of the Day Caro Policy Manual and may b e obtain e d from 
tho ooction. materials developed by the Division and 
distributed to local purchasing agencies. 

Statutory Authority G.S. 143B-153(2a). 

SECTION .0200 - START-UP FUNDS 

.0202 REVIEW CRITERIA FOR START-UP FUNDS 

(a) All proposals for start-up funds must be submitted on 
a format designated by the section. Division. Each proposal 
will be reviewed and evaluated according to criteria estab- 
lished and published by the section. Division. The criteria 
shall be specific to the type of project being funded. 

(b) A concurrent review process will be conducted by the 
divioion'o Division's fiscal staff to assure that all budgetary 
requirements have been addressed in the proposal and that 
the requesting agency is operating in conformity with 
standard accounting procedures. 

(c) All start-up funding will be subject to the availability 
of state and federal funds. 

Statutory Authority G.S. 143B-153(2a). 

SUBCHAPTER 46E - DAY CARE CENTER 
REQUIREMENTS 

SECTION .0100 - GENERAL 

.0108 PURCHASE OF CARE REQUIREMENTS 

(a) Any center which wishes to participate in the state 
Purchase of Care Program as defined in 10 NCAC 46A 
.0005 must satisfy applicable state day care requirements as 
codified in 10 NCAC 3U. 

(b) Any center not required to be licensed must be able 
to document that it is in compliance with all day care 
standards applicable to the licensed type of program most 
similar to that being operated, e.g., similar size, age groups 
served. 

(c) Any center exempt from licensure must ensure that 
the building is in compliance with appropriate building and 
fire safety codes and sanitation regulations to provide 
adequate protection for the ages of the children in care. 
Copies of approved inspection reports will be on file in the 
s e ction Division and the center. 

(d) The operator of any center in the Purchase of Care 
Program must assure that the center complies with all 
applicable provisions of the Civil Rights Act of 1964 and all 
requirements imposed thereunder. Th e op e rator shall sign 
a statemont of assurance on a form provided by tho section. 
Copies of the statement shall be on file in the section and 



tho center. 

(e) Each day care center shall submit appropriate infor- 
mation to enable the o e otion EHvision to establish a payment 
rate for the center in accordance with the rate setting 
policies In the annual appropriations act and codified in 
Subchapter 46C. 

Statutory Authority G.S. 143B-153(2a). 

.0109 APPLICATION 

Application for approval to participate may be made to the 
section. Division. 

Statutory G.S. 143B-153(2a). 

.0111 CONTINUED PARTICIPATION 

(a) Any center approved for participation in the Purchase 
of Care Program will continue to be eligible for as long as 
the center maintains comphance with all of the requirements 
set forth in this Subchapter. 

fb) When a center is found to be out of compliance with 
any requirement for participation, the s e ction Division may 
set a time limit for compliance. If the center fails to comply 
within the set time limit, approval will be terminated. 

Statutory Authority G.S. MSB- 153 (2a). 

SUBCHAPTER 46F - CHILD DAY CARE HOME 
REQUIREMENTS 

SECTION .0100 - DAY CARE HOME APPROVAL 
PROCEDURES 

.0107 APPROVAL 

(a) Provisional approval may be issued for a limited 
fjeriod of time to a program which does not, at the time of 
such issuance, meet all of the requirements for approval but 
which is expected to meet them by the end of the period. 

(b) Approval indicates that all requirements have been 
met. 

(c) Each child day care home shall be evaluated aimually 
by the s e ction Division for compliance with the require- 
ments for participation in the purchase of care program. 

Statutory Authority G.S. 110-88; 143B-153. 

.0108 PURCHASE OF CARE 

(a) Any home which wishes to participate in the state 
purchase of care program as defined in 10 NCAC 46A 
.0005 must comply with the standards for child day care 
homes as codified in 10 NCAC 3U .1700 and all other 
applicable state child day care home requirements in 10 
NCAC 3U and Article 7 of Chapter 110 of the N.C. 
General Statute. Statutes. 

(b) The operator of any home in the purchase of care 
program must assure that the home complies with all 
applicable provisions of the Civil Rights Act of 1964 and all 



1726 



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November 15, 1995 10:16A 



PROPOSED RULES 



requirements imposed thereunder. Tho operator ohall sign 
a otatemont of aoounmoo on a form provid e d by th e oootion. 
Copi e s of tho otntomont ohall bo on fil e in th e s e ction and in 
tho homo. 

(c) Any home that wishes to participate in the purchase of 
care program must be issued an approval notice for partici- 
pation and payment from the oootion. Division. 

Statutory Authority G.S. 143B-153(2a); S.L. 1989. c. 500, 
s. 101. 

.0110 CONTINUED PARTICIPATION 

(a) Any home approved for participation in the purchase 
of care program will continue to be eligible for as long as 
the home maintains compliance with all of the requirements 
set forth in this Subchapter. 

(b) When a home is found to be out of compliance with 
any requirement for participation, the o e otion Division may 
set a time limit for compliance. If the home fails to comply 
within the set time limit, approval will be terminated. 

Statutory Authority G.S. MSB- 153 (2a). 

SUBCHAPTER 46G - NONREGISTERED DAY 
CARE HOME REQUIREMENTS 

SECTION .0100 - GENERAL REQUIREMENTS 

.0110 DIVISION RESPONSIBILITY 

(a) The s e ction. Division, as defined in 10 NCAC 46A 
.0005, is responsible for the administration of the require- 
ments and procedures for approving nonregistered day care 
homes in which day care fiinds administered by the Depart- 
ment are used to subsidize the day care cost for children of 
families eligible for assistance. 

(b) The number of nonregistered day care home arrange- 
ments that shall be visited by the section Division for the 
purpose of evaluating compliance with the requirements for 
participation in the purchase of care program shall be 
included in the monitoring plan developed annually by the 
section. Division. 

(c) All complaints registered against nonregistered day 
care homes shall be investigated by the s e ction. Division. 
The investigation may include an on-site visit by an autho- 
rized representative of the Department. 

(d) Documentation of substantiated complaints shall be 
available for parents to examine. 

Statutory Authority G.S. MSB- 153 (2a). 

.0113 MAINTAINING APPROVAL 

(a) When a provider is found to be out of compliance at 
any time with any requirement for participation, the local 
purchasing agency or the o e otion Division shall set a 
specified time limit for compliance. If the provider fails to 
comply within the specified time limit, approval may be 
terminated. 



(b) Each nonregistered day care home shall be evaluated 
for compliance annually as described in Rule .0111 in this 
Section. 

Statutory Authority G.S. M3B-153(2a). 

SECTION .0200 - REQUIREMENTS FOR 
NONREGISTERED DAY CARE HOMES 

.0214 HEALTH AND SAFETY STANDARDS 

Each nonregistered day care home shall comply with the 
following requirements in order to maintain a safe, healthy 
and sanitary environment for children: 

(1) A health and emergency information form com- 
pleted and signed by the child's parents or guard- 
ian shall be on file for each child who attends. 
The completed form must be on file on the first 
day the child attends with the exception of the 
child's immunization record which must be com- 
pleted within 30 days after the first day the child 
attends. A recommended form is available from 
the s e ction. Division. However, the provider may 
use another form provided that form includes the 
following information: 

(a) the child's name, address, and date of birth; 

(b) the names of individuals to whom the child may 
be released; 

(c) the general status of the child's health; 

(d) any allergies or restrictions on the child's partic- 
ipation in activities with specific instructions 
from the child's parent or health professional; 

(e) the names and phone numbers of persons to be 
contacted in an emergency situation; 

(f) the name and phone number of the child's health 
provider and preferred hospital; 

(g) authorization for the provider to administer 
specified medication according to the parent's 
instructions, if the parent so desires; 

(h) authorization for the provider to seek emergency 
medical care in the parent's absence; 

(i) a record of the child's immunizations as required 
pursuant to G.S. 130A-152. 

(2) The parent and provider must discuss and agree 
upon the methods of discipline to be used with 
each child. The use of corporal punishment is 
prohibited except as allowed in G.S. 1 10-101. 1. 

(3) All areas used by the children, indoors and out- 
doors, shall be kept clean and orderly and free of 
items which are hazardous to children. 

(4) First-aid supplies shall be kept in a place easily 
accessible to the provider but out of the reach of 
children. 

(5) A working telephone shall be proximate to the day 
care home arrangement. A written plan shall be 
developed that describes how the provider will 
access emergency assistance. Emergency phone 
numbers shall be readily available. 



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1727 



PROPOSED RULES 



(6) To assure the safety of children whenever they are 
transported, the provider, or any other transporta- 
tion provider, shall comply with all applicable 
state and federal laws concerning the transporta- 
tion of passengers. All children regardless of age 
or location in the vehicle shall be restrained by 
individual seat belts or child restraint devices. 

(7) Garbage shall be stored in waterproof containers 
with tight fitting covers. 

(8) The provider shall have sanitary toileting facilities, 
and sanitary diaper changing and handwashing 
facilities. 

(9) Soiled diapers shall be placed in a covered 
leak-proof container which is emptied and cleaned 
frequently. 

(10) The provider shall wash her hands after toileting 
and after diapering each child. 

(11) The provider shall complete and keep on file the 
health self-questionnaire form provided by the 
Division. 

(12) Each provider shall obtain written proof that she 
is free of active tuberculosis prior to initial ap- 
proval and every two years thereafter. 

(13) The provider shall serve nutritious meals and 
snacks appropriate in amount and type of foods 
served for the ages of children in care. 

(14) The provider shall provide daily opportunities for 
supervised outdoor play or fresh air, weather 
permitting. 

(15) The provider shall assure that the structure in 
which the day care arrangement is located has 
clean drinking water, an approved sanitary dis- 
posal system, weather-tight construction, and is 
otherwise safe for human habitation. 

(16) Fuel burning heaters used when the children are in 
care shall be properly vented to the outside. Fuel 
burning heaters, fireplaces, stoves, and portable 
electric heaters, when in use, shall have a securely 
attached guard. 

(17) A battery-operated smoke detector shall be in- 
stalled in the primary caregiving area of each 
nonregi stared day care home. 

(18) The provider shall successfully complete a basic 
multimedia first aid course within three months of 
beginning participation in this program. 

Statutory Authority G.S. 143B-153(2a}. 

SUBCHAPTER 46H - POLICIES FOR PROVISION 
OF CHILD DAY CARE SERVICES 

SECTION .0100 - GENERAL POLICIES 

.0101 SCOPE 

The rules of this Subchapter set forth general policies 
governing conditions for the provision of child day care 
services under the funding sources administered by the 



Child Day Caro Section. Division. General policies include 
methods of service provision, definition of the service, and 
e ligibl e targ e t populationo. eligibility criteria. 

Statutory Authority G.S. 1438- 153. 

.0103 DEFINmON OF SERVICE 

(a) Primary Service. Child day care services means the 
provision of protection, care and developmental experiences 
to children ages birth to 18 years, for a portion of a day but 
less than 24 hours, in the child's own home, in the home of 
a caregiver, or in a day care facility. I^ch type of care 
arrangement must meet all state and federal standards 
applicable to such arrangements. Services include providing 
information to families and the community about what 
constitutes a good day care experience for a child and 
assisting eligible families as needed in the cost of purchase 
of the day care service consistent with state policies. The 
provision of facilities and the essentials of daily living; a 
daily program of care; education and recreational activities; 
remedial care and services appropriate to the age and 
developmental level of the child; and health supervision are 
also included. In addition, transportation may be included. 
For each type of care arrangement, the equipment and 
materials necessary to carry out the daily program of 
activities are included. M e dical e xamination t? r e quir e d for 
staff, — afld — for childr e n — for admiooion to day oar e and 
periodically thoroaftor. may bo provided when not othorv . 'iso 
available. 

(b) Component. Transportation, when needed and not 
otherwise available, must be provided to access day care 
service programs for persons receiving services in conjunc- 
tion with protective services, services, — and for persons 
eligible for s e rvic e on th e basis of th e ir incom e maint e nanc e 
status. Transportation, when needed and not otherwise 
available, may be provided to access day care services for 
other persons who are eligible for child day care services. 

Statutory Authority G.S. 143B-153. 

.0104 ELIGIBILITY CRITERIA 

(a) Child day care services must be provided to eligible 
children, as determined by the county department of social 
services or its designee according to the criteria in 10 
NCAC 46H .0200, who are in one or more of the following 
targ e t populations need services for one of the following 
reasons when funds and care resources are available; 

(1) children whose parents, foster parents, or other 
adults responsible for the care of the child need 
child care support in order to seek or maintain 
employment. 

(2) children whose parents, foster parents, or other 
adults responsible for the care of the child need 
child care support to attend school or job train- 
ing activities as described in Rule .0105 of this 
Section. 

(3) children who need child care assistance in order 



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November 15, 1995 10:16A 



PROPOSED RULES 



to remain in their own homes during the period 
in which they receive protective services for 
children. 

(4) children who nood child caro aaaistanoo as 

dofinod by tho local agency — rosponsiblo for 
dotormining oliont eligibility and who ar e in 
lioonood foot e r car e homoo or for whom th e 
countj' doportmont of aocial 9or . 'ico3 has cus 
tody. 

(b) Child day care services may be provided to eligible 
children, as determined by the county department of social 
services or its designee, according to the criteria in 10 
NCAC 46H .0200 in the following circumstances: 

(1) children who are eligible according to the crite- 
ria defined in either Rule .0202 or Rules .0203 
and .0204 of this Subchapter whose emotional, 
cognitive, social or physical development is 
delayed or is at risk for delay. 

(2) children who meet the eligibility criteria for 
Child Welfare Services funds as provided in the 
North Carolina Division of Social Services' 
Family Services Manual, Volume I, Chapter 11, 
and who need child care assistance as a support 
to the family preventive or reunification services 
described in the manual. 

(c) Notwithstanding other rules in this Chapter, child day 
care services may be provided to children in counties 
participating in the Early Childhood Education and Develop- 
ment Initiatives Program authorized by G.S. 143B, Part lOB 
of Article 3, provided that the child care services are 
included in the county's Early Childhood Education and 
Development Plan as approved by the Department of Human 
Resources. 

(d) When the availability of funding is less than the 
amount needed to serve all eligible children, the local 
agency responsible for determining child eligibility for 
subsidized child care services may establish the priority m 
which th e targ e t populationo identifi e d in Paragraphs (a) 
through (o) of this Rul e will b e o e p i ' e d. for serving families. 
The order of priority shall be stated in writing and made 
available to applicants for child care assistance. 

Statutory Authority G.S. 143B-153. 

.0105 SUPPORT TO EMPLOYMENT: TRAINING 
FOR EMPLOYMENT 

(a) Child day care services must be provided to support 
employment of the child's parents. 

(b) Child day care services must be provided to support 
training leading to employment of the child's parents. 
parents; e xc e pt that an ag e ncy may obtain a waiver from 
providing support to training loading to employment. The 
s ection shall administer tho waiver provision. 

(c) Where a parent or responsible adult remains in the 
home and is capable of providing care for the child, child 
day care services may not be provided as a support for 
employment or training. Where it is determined that such 



parent is incapable of providing care for the child, the 
reasons for this determination must be documented in the 
client record. 

(d) Day care services may be provided when the parent 
or responsible adult is engaged in gainful employment on 
either a full-time or part-time basis. 

(e) Where the parent or responsible adult is temporarily 
absent from work with arrangements to continue the same 
employment, child day care services shall continue for at 
least 30 days. Where an absence from work extends beyond 
30 days, the agency responsible for determining eligibility 
shall determine on the basis of individual circumstances 
whether day care should continue beyond that time period. 
Where child care is continued beyond 30 days, the reasons 
for such extension shall be documented in the client's 
record. 

(f) Where a parent is unemployed but is seeking employ- 
ment, child day care services will be provided for a mini- 
mum of 30 days if tlie parent is already receiving subsidized 
child day care services or the parent or responsible adult is 
enrolled in a job search activity as part of an approved 
employment/training plan. Continuation of the service may 
be extended if the agency determines such extension is 
warranted, provided the reason for the extension is docu- 
mented in the client's record. 

(g) Training leading to employment shall include the 
following: 

(1) continuation of high school within the school 
system; and 

(2) basic education or a high school education or its 
equivalent in community colleges or technical 
institutes; and 

(^ vocational, technical, or skills training in pro 

grams which ar e d e signed to last for up to two 

y e ars; and 

post secondary education or skills training, up to 

a maximum of two years enrollment. 

in th e cas e of current or former income maint e 



(4f- 



nono e r e cipi e nts, — e nrollm e nt in a four y e ar 
college dogroo program. 

Statutory Authority G.S. 143B-153. 

.0108 LIMFTATIONS 

(a) Child day care services as a support for protective 
services may not be provided to children living in foster 
care arrangements. 

(b) Child day care services as a support for training 
leading to employment for the parent or responsible adult 
may not be provided when the parent is enroll e d in a four 
y e ar coll e g e d e gr ee program or participating in graduate or 
p>ost-graduate studies, stud i e s , except as stipulated in Rule 
.0105(g)( 4 ) of this Section. 

(c) Child day care services are limited to a total of two 
years when the parent is enrolled in a post-secondary degree 
program. 

(d) Child day care services shall not be provided to non- 



10:16A 



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November 15, 1995 



1729 



PROPOSED RULES 



citizen families who are residing in the state illegally, with 
the exception of children receiving child protective or foster 
care services. 

Statutory Authority G.S. 143B-153. 

.0110 DEFINmON OF SPECIAL NEEDS CHILD 

(a) A special needs child is one who qualifies under one 
or more than one of the criteria listed in this Paragraph: 

(1) a child who is determined by the area mental 
health/developmental disabilities/substance abuse 
program to meet the definition of special needs 
pursuant to G.S. I22C and codified in 10 NCAC 
14K .0103(c) (11). (24), and (40); including 
subsequent amendments; or 

(2) a child who is determined by the local educa- 
tional agency (LEA) to meet the definition of 
special needs as defined in the Department of 
Public Instruction's "Procedures Governing 
Programs and Services for Children With Spe- 
cial Needs", Section .1501 A. except that the 
definition of an academically gifted child in 
.1501 A is not considered a special needs child 
when determining the eligibility of a child for 
the subsidized child day care program. This 
incorporation includes subsequent amendments 
and editions. 

A copy of 10 NCAC 14K, Section .0100 can be obtained 
from the Office of Administrative Hearings, P.O. Drawer 
27447, Raleigh, North Carolina, 27611-7447. (919) 
733-2678. (919) 733 2678, at a ooot of t>vo dollars and fift>' 
cant3 ($2.50) at the time of adoption of this Rule. A copy 
of "Procedures Governing Programs and Services for 
Children With Special Needs" can be obtained from the 
North Carolina Department of Public Instruction, Attention: 
Cash Management, 116 West Edenton Street, Raleigh, NC 
27603 1712, (919) 733 4 258, 301 North Wilmington Street, 
Raleigh, North Carolina 27601-2825, (919) 715-1018. a^ 
cost of tv . 'o dollars and fort)' c e nts ($2.10) at the time of 
adoption of this Rule. 

(b) TTie agency determining eligibility for the services 
shall have on file a signed letter, statement, or summary 
from the person authorized to make the diagnosis to docu- 
ment the "special need" condition and a summary of the 
special services required to meet the child's needs as 
outlined in the child's individualized plan. An individual- 
ized plan is required to be developed by the area mental 
health program or the local educational agency for every 
child who is determined to meet the definition of a special 
needs child pursuant to PL 99-457, G.S. 122C-3 and G.S. 
115C-146.1. 

(c) Eligibility for the supplemental rate shall be contingent 
upon the pro\ider's compliance uith the activities designated 
for the provider in the child's individualized plan. 

Statutory Authority G.S. MSB- 153 (la). 



SECTION .0200 - ELIGIBELITY FOR SERVICES 

.0201 BASIC ELIGIBILITY CRITERIA 

In addition to the requirements of 10 NCAC 46H .0100, 
in order for an individual to be determined eligible to 
receive child day care services funded undor th e Social 
Son . 'iooo Block Grant (SSBG) or th e Stat e Day Caro Fund, 
with Child Day Care Services Funding, it must be estab- 
lished that he is eligible eligible: 

{^ on th e basis of incom e maint e nonoo statue; 

fS) on the basis of income eligible status, status; or 

(5^ for day care to support protective sor . 'iceG as 

described in 10 NCAC 4 6H .0106, on tho basis of 
nood without regard to income, unless the service 
is available uithout regard to income as referenced 
in Rule .0206 of this Subchapter. 

Statutory Authority G.S. 1438-153. 

.0202 INCOME MAINTENANCE STATUS 

For an individual to bo eligible on tho basis of income 
maint e nanc e otatuii, it must b e e Gtabliohed that th e individual 
is e ith e r: 
(4^ a current recipient of Aid to Families with Be 

pendent Children — (AFDC) or a person whoso 

n ee ds ar e includ e d in th e grant to an i\FDC 

r e cipi e nt; or 
(3^ a — current — r e cipient — of Supplemental — Security 

Income (SSI); or 
(39 a child with respect to whom foster care mainto 

nanoo paym e nts or adoption assistance paym e nts 

aro made undor Title IV E. 

Statutory Authority G.S. 1438-153. 

.0203 INCOME ELIGIBLE STATUS 

(a) For the purpose of the rules in this Subchapter, the 
term "income unit" shall apply to persons who reside in the 
same household and who, according to North Carolina law, 
are responsible for the financial support of the individual 
whose eligibility for child day care services is being deter- 
mined. Also for the purpose of determining eligibility for 
day care services, the terms "income unit" and "family" are 
used interchangeably in the rules in this Subchapter. 

(b) When the amount of income available to an individual 
is a condition of eligibility for child day care services, it is 
necessar>' to determine the number of persons in the 
individual's income unit and the amount of the gross income 
available to the income unit. 

(1) The number of individuals in the income unit is 
referred to as the "income unit size" or "family 
size". These terms are used interchangeably in 
the rules in this Subchapter. 

(2) The total amount of the income used to deter- 
mine day care eligibilit)' is referred to as the 
"gross income of the income unit" or "family 
income". These terms are used interchangeably 



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November 15, 1995 10:16A 



PROPOSED RULES 



in the rules in this Subchapter. 

(c) Child day care services may be provided to individu- 
als other than those described in 10 NCAC 46D .0103(e) 
and in Rules .0202 and .0206 of this Subchapter provided 
the gross annual income of the individual's income unit does 
not exceed the state's maximum income eligibility limit (as 
defined in Rule .0204 of this Subchapter) for the number of 
persons in that income unit. 

(d) The following are defined as separate income units for 
the purposes of determining eligibility and client fees for 
child day care services: 

(1) Biological and adoptive parents and their minor 
children. A step-parent shall be included in the 
income unit with his/her spouse when the chil- 
dren in need of care include their biological or 
adoptive child and step-siblings. 

(2) A minor parent and his or her children. 

(3) Each adult whether related or unrelated, other 
than spouses. 

(4) Each child living with anyone other than their 
biological or adoptive parents. 

(e) Income to be considered when computing the gross 
income of the income unit is listed in the Division of Social 
Sor^'ioos' Family Child Day Care Services Manual issued by 
the Division of Child Development. Manual, as doscribod in 
10 NCAC 35A .0003. 

Statutory Authority G. S. 143B-153. 

.0206 WITHOUT REGARD TO INCOME 

Child day care services needed in conjunction with 

protective services for children as described in 10 NCAC 

46H .0106 will be provided without regard to income up to 

a maximum of 12 months from the time protective services 

is initiated, provided that all conditions set forth in 10 

NCAC 35E .0106(a)(6) are met. In addition, child day care 

services shall be provided without regard to income for: 

iU children described in 10 NCAC 46H .0104 who 

need child care services and meet eligibility 

criteria for Child Welfare Services: and 

(2) children receiving foster care services who are in 

the custody of the county department of social 

services and are residing in licensed foster care 

homes or in the care of adults other than their 

parents. 

Statutory Authority G.S. MSB- 153 (2a). 

.0207 RESPONSIBILITY FOR ELIGIBILITY 
DETERMINATION 

Responsibility for eligibility determination, redetermina- 
tion, and case management for child day care services 
funded by Social Sor i 'ices Block Grant and state child day 
care services fundo funding shall rest with those agencies 
authorized by the Secretary of the Department of Human 
Resources. Roaouroos ao oot forth in 10 NCAC ISL .0301. 



Statutory Authority G.S. 143B-153. 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the DHR - Social Services Commission 
intends to adopt rule cited as 10 NCAC 49C .0107. 

Temporary: This Rule was filed as a temporary adoption 
effective December 1, 1995 for a period of 180 days or until 
the permanent rule becomes effective, whichever is sooner. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 10:00 a.m. on 
December 6, 1995 at the Albemarle Building, Room 943-2, 
325 N. Salisbury Street, Raleigh, NC 27603. 

Reason for Proposed Action: The proposed amendment to 
Subchapter 49C is needed in order to provide necessary 
flexibility to adjust reimbursements for covered EA services 
to achieve the necessary reduction of expenditures to stay 
within anticipated federal funding while protecting covered 
services to the maximum extent possible. This requires 
adoption of 10 NCAC 49C . 0107. Priority for use of the 
projected available fiinds will be (1) to maintain support for 
local Child Protective Services activities at the full level 
currently projected for SPY 95-96; and (2) to maintain 
support for EA Services provided by the DHR Divisions of 
Social Services, Youth Services, and Mental Health to the 
maximum extent possible for as long as funds remain 
available up to the level consistent with the federal reduction 
anticipated in SPY 95-96. 

Comment Procedures: Comments may be presented in 
writing any time before or at the public hearing or orally at 
the hearing. Time limits for oral remarks may be imposed 
by the Commission Chairman. Any person may request 
copies of this Rule by calling or writing to Shamese Ran- 
some, Division of Social Services, 325 N. Salisbury Street, 
Raleigh, NC 27603 (919) 733-3055. 

Fiscal Note: This Rule affects the expenditure or distribu- 
tion of State funds subject to the Executive Budget Act, 
Article 1 of Chapter 143. 

CHAPTER 49 - AFDC 

SUBCHAPTER 49C - EMERGENCY ASSISTANCE 

SECTION .0100 - COVERAGE 

.0107 LIMITATIONS 

(a) Reimbursements for covered emergencies may be 
limited in the event that the Director of the Budget finds that 
Federal and state funds are insufficient to continue current 
service levels. 



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November 15, 1995 



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PROPOSED RULES 



£b} In applying such limitations, priority for reimburse- 
ments shall be set by the Secretary of the Department of 
Human Resources. 

Authority G.S. 108A-39.1; 143B-153; 45 C.F.R. 233.120. 



TITLE 11 - DEPARTMENT OF INSURANCE 

Notice is hereby given in accordance with G.S. 
150B-2I.2 that the NC Department of Insurance 
intends to adopt rules cited as 11 NCAC 4 .0501 - .0509. 

Proposed Effective Date: January 1, 1997. 

A Public Hearing vv/7/ be conducted at 2:00 p.m. on 
December 14, 1995 at the Dobbs Building, 3rd Floor 
Hearing Room, 430 N. Salisbury Street, Raleigh, NC 27611. 

Reason for Proposed Action: Provide more adequate 
disclosure to consumer of life insurance coverages. 

Comment Procedures: Written comments and questions 
should be directed to Tony Higgins, 430 N. Salisbury Street, 
Raleigh, NC 27611, (919) 733-4935. Oral presentations 
may be made at the public hearing. 

Fiscal Note: This Rule does not affect the expenditures or 
revenues of local government or state funds. 

CHAPTER 4 - CONSUMER SERVICES DIVISION 

SECTION .0500 - LIFE INSURANCE 
ILLUSTRATIONS 

.0501 SCOPE AND DEFINITIONS 

(a) This Section applies to all policies sold on and after 
the effectiye date of this Section. 

(b) As used in this Section, the following terms have the 
following meanings: 



m 



£2} 



13} 



14} 



15} 



"Actuarial Standards Board" means the board 



established by the American Academy of Actu- 
aries to develop and promulgate standards of 
actuarial practice. 

"Basic illustration" means a ledger or proposal 
used in the sale of a policy that shows both 
guaranteed and non-guaranteed elements. 
"Contract premium" means the gross premium 
that is required to be paid under a Fixed pre- 
mium policy, including the premium for a rider 
for which benefits are shown in the illustration. 
"Currently payable scale" means a scale of 
non-guaranteed elements in effect for a policy as 
of the preparation date of the illustration or 
declared to become effective within the next 95 
days. 
"Disciplined current scale" means a scale of 



non-guaranteed elements constituting a limit on 
illustrations currently being illustrated by an 
insurer that is reasonably based on actual recent 
historical experience, as certified annually by an 
illustration actuary designated by the insurer. 

(6) "Guaranteed elements" means the premiums, 
benefits, values, credits, or charges under a 
policy that are guaranteed and determined at 
issue. 

(7) "Illustrated scale" means a scale of 
non- guaranteed elements currently being illus- 
trated that is not more favorable to the policy 
owner than the lesser of: 

(A) The disciplined current scale; or 

(B) TTie currently payable scale. 

(8) "Illustration" means a presentation or depiction 
that includes non-guaranteed elements of a 
policy over a period of years and that is either a 
basic illustration, in-force illustration, or a 
supplemental illustration. 

(9) "In force illustration" means an illustration 
furnished at any time after the policy that it 
depicts has been in force for one year or more. 

(10) "Illustration actuary" means an actuary meeting 
the requirements of U NCAC 4 .0509 who 
certifies to illustrations based on the standard of 
practice promulgated by the Actuarial Standards 
Board. 

(11) "Lapse -supported illustration" means an illustra- 
tion of a policy failing the test of self-supporting 
as defined in this Section, under a modified 
persistency rate assumption using persistency 
rates underlying the disciplined current scale for 
the first five years and 100 percent [X)licy persis- 
tency thereafter. 

(12) "Non-guaranteed elements" means the premi- 
ums, benefits, values, credits, or charges under 
a policy that are not guaranteed or not deter- 
mined at issue. 

(13) "Policy" means a group or individual life insur- 
ance policy or certificate. "Policy" does not 
include: 

(A) A variable life insurance policy or certificate. 

(B) An annuity contract. 

(C) A credit life insurance policy or certificate. 

(D) A life insurance policy with no illustrated 
death benefit on any individual exceeding ten 



(14) 
(15) 
(16) 



thousand dollars ($10,000). 
"Policy owner" means the owner named in a 
policy or the certificate holder in the case of a 
group policy. 

"Premium outlay" means the amount of pre- 
mium assumed to be paid by the pwlicy owner or 
other premium payer out-of-pocket. 
"Self-supporting illustration" means an illustra- 
tion of a policy for which it can be demonstrated 
that, when using experience assumptions under- 



1732 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



lying the disciplined current scale, for all illus- 
trated points in time on or after the fifteenth 
policy annjyersary or the twentieth policy anni- 
versary for second-or-later-to-die policies (or 
upon policy expiration if sooner), the accumu- 
lated value of all policy cash flows equals or 
exceeds the total policy owner value available. 
For this purpose, policy owner value will in- 
clude cash surrender values and any other illus- 
trated benefit amounts available at the policy 
owner's election. 
(17) "Supplemental illustration" means an illustration 
furnished in addition to a basic illustration that 
meets the applicable requirements of this Sec- 
tion, and that may be presented in a format 
differing from the basic illustration, but may 
only depict a scale of non-guaranteed elements 
that is permitted in a basic illustration. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 

.0502 ASSUMED EXPENSES AND CURRENT 
SCALE 

(a) As used in this Rule, "minimum assumed expenses" 
means the minimum expenses current scale for a policy. An 
insurer may choose to designate each year the method of 
determining assumed expenses for all policies from the 
following: 

(1) Fully allocated expenses. 

(2) Marginal expense. 

(3) A generally recognized expense table based on 
fully allocated expenses representing a signifi- 
cant portion of insurance companies and ap- 
proved by the [National Association of Insurance 
Commissioners or by the Commissionerl. 

Marginal expenses may be used only if greater than a 
generally recognized expense table. If no generally recog- 
nized expense table is approved, fully allocated expenses 
must be used. 

(b) Further guidance in determining the disciplined 
current scale as contained in standards established by the 
Actuarial Standards Board may be relied upon if the 
standards: 

(1) Are consistent with all provisions of this Sec- 
tion. 

(2) Limit a disciplined current scale to reflect only 
actions that have been taken on events that have 
already occurred. 

(3) Do not permit a disciplined current scale to 
include any projected trends of improvements in 
experience or any assumed improvements in 
experience beyond the illustration date. 

(4) Do not permit assumed expenses to be less than 
minimum assumed expenses. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 



15; 58-60-20; 58-63-15; 58-63-65. 

.0503 ILLUSTRATED POLICIES 

(a) Each insurer marketing policies to which this Section 
applies shall notify the Commissioner whether a policy is to 
be marketed with or without an illustration. For all policies 
being actively marketed on the effective date of this Section, 
the insurer shall identify in writing those policies and 
whether or not an illustration will be used with them. For 
policies filed after the effective date of this Section, the 
identification shall be made at the time of Filing. Any 
previous identification may be changed by notice to the 
Commissioner. 

(b) If the insurer identifies a jxiUcy as one to be marketed 
without an illustration, any use of an illustration before the 
first policy anniversary for any policy using that policy is 
prohibited. 

£c} If a policy is identified by an insurer as one to be 
marketed with an illustration, a basic illustration prepared 
and delivered in accordance with this Section is required, 
except that a basic illustration need not be provided to 
individual members of a group or to individuals insured 
under multiple lives coverage issued to a single applicant 
unless the coverage is marketed to those individuals. The 
illustration furnished to an applicant for a group policy 
issued to a single applicant on multiple lives may be either 
an individual or composite illustration representative of the 
coverage on the lives of members of the group or the 
multiple lives covered. 

(d) As used in this Paragraph, "non-term group life" 
means a group policy or individual policies of traditional 
permanent or universal life insurance issued to members of 
an employer group where: 

(1) Every plan of coverage was selected by the 
employer. 

(2) The premium is paid by the employer or through 
payroll deduction. 

(3) Group underwriting or simplified underwriting 
is used. 

Potential enrol lees for policies and certificates of non-term 
group life subject to this Section shall be furnished a 
quotation with the enrollment materials. The quotation shall 
show potential policy values for samp le ages and policy 
years on a guaranteed and non-guaranteed basis appropriate 
to the group and the coverage. This quotation shall not be 
considered an illustration for purposes of this Section, but 
all information provided shall be consistent with the illus- 
trated scale. A basic illustration shall be provided at 
delivery of the policy or certificate to enrollees for non-term 
group life who enroll for more than the minimum premium 
necessary to provide pure death benefit protection. In 
addition, the insurer shall make a basic illustration available 
to any non-term group life enrollee who requests iL 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1733 



PROPOSED RULES 



.0504 GENERAL RULES 

(a) As used in this Rule, "generic name" means a short 
title descriptive of the policy being illustrated, such as 
"whole life", "term life", or "flexible premium adjustable 
life." An illustration used in the sale of a policy shall 
satisfy the applicable requirements of this Section, be clearly 
labeled "life insurance illustration" and contain the following 
basic information: 

Name of insurer. 



m 

01 



£4} 
£5} 
16} 

m 



Name and business address of producer or 
insurer's authorized representative, if any. 
Name, age and sex of proposed insured, except 
where a composite illustration is permitted under 
this Section. 

Underwriting or rating classification upon which 
the illustration is based. 

Generic name of the policy, the company prod- 
uct name, if different, and policy form number. 
Initial death benefit. 

Dividend option election or application of 
non-guaranteed elements, if applicable. 
(8) Clear disclosure of the method used by the 
company to allocate expenses, as disclosed to the 
Commissioner in the actuarial certification as 
required in 1 1 NCAC 4 .0509(c). 
(h) When using an illustration in the sale of a policy, an 

insurer or its agents or other authorized representatives shall 

not: 

(1") Represent the policy as anything other than a life 
insurance policy; 

(2) Use or describe non-guaranteed elements in a 
manner that is misleading or has the capacity or 
tendency to mislead; 

(3) State or imply that the payment or amount of 
non-guaranteed elements is guaranteed; 

£4} Use an illustration that does not comply with the 
requirements of this Section; 

(5) Use an illustration that at any policy duration 
depicts policy performance more favorable to the 
policy owner than that produced by the illus- 
trated scale of the insurer whose policy is being 
illustrated; 

(6) Provide an applicant with an incomplete illustra- 
tion; 

(7) Represent in any way that premium payments 
will not be required for each year of the policy 
in order to maintain the illustrated death bene- 



fits, unless that is the fact; 



£8} 



(21 



(10) 



Use the term "vanish" or "vanishing premium", 

or a similar term that implies the policy becomes 

paid up, to describe a plan for using 

non-guaranteed elements to pay a portion of 

future premiums; 

Except for policies that can never develop 

nonforfeiture values, use an illustration that is 

" lapse-supported " ; or 

Use an illustration that is not "self-supporting." 



(c) If an interest rate used to determine the illustrated 
non-guaranteed elements is shown, it shall not be greater 
than the earned interest rate underlying the disciplined 
current scale. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 

.0505 STANDARDS FOR BASIC ILLUSTRATIONS 

(a) Format. A basic illustration shall conform with the 
following requirements: 

(1) The illustration shall be labeled with the date on 
which it was prepared. 

(2) Each page, including any explanatory notes or 
pages, shall be numbered and show its relation- 
ship to Ae total number of pages in the illustra- 
tion (e.g., the fourth page of a seven-page 
illustration shall be labeled "page 4 of 7 pages"). 

(3) TTie assumed dates of payment receipt and 
benefit pay-out within a policy year shall be 
clearly identified. 

(4) If the age of the proposed insured is shown as a 
component of the tabular detail, it shall be issue 
age plus the numbers of years the policy is 
assumed to have been in force. 

(5) The assumed payments on which the illustrated 
benefits and values are based shall be identified 
as premium outlay or contract premium, as 
applicable. For policies that do not require a 
specific contract premium, the illustrated pay- 
ments shall be identified as premium outlay. 
Guaranteed death benefits and values available 



(6} 



III 



(81 



(21 



(101 



upon surrender, if any, for the illustrated pre- 
mium outlay or contract premium shall be shown 
and clearly labeled guaranteed. 
If the illustration shows any non-guaranteed 
elements, they cannot be based on a scale more 
favorable to the policy owner than the insurer's 
illustrated scale at any duration. These elements 
shall be clearly labeled non-guaranteed. 
The guaranteed elements, if any, shall be shown 
before corresponding non-guaranteed elements 
and shall be specifically referred to on any page 
of an illustration that shows or describes only 
the non-guaranteed elements (e.g., "see page one 
for guaranteed elements"). 
The account or accumulation value of a policy, 
if shown, shall be identified by the name this 
value is given in the policy being illustrated and 
shown in close proximity to the corresponding 
value available upon surrender. 
TTie value available upon surrender shall be 
identified by the name this value is given in the 
policy being illustrated and shall be the amount 
available to the policy owner in a lump sum 
after deduction of surrender charges, policy 
loans and policy loan interest, as applicable. 



1734 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



(11) Illustrations may show policy benefits and values 
in graphic or chart form in addition to the 
tabular form. 

(12) Any illustration of non-guaranteed elements shall 
be accompanied by a statement indicating that: 

(A) The benefits and values are not guaranteed^, 

(B) TTie assumptions on which they are based are 
subject to change by the insurer; and 

(C) Actual results may be more or less favorable. 

(13) If the illustration shows that the premium payer 
may have the option to allow policy charges to 
be paid using non-guaranteed values, the illustra- 
tion must clearly disclose that a charge continues 
to be required and that, depending on actual 
results, the premium payer may need to continue 
or resume premium outlays. Similar disclosure 
shall be made for premium outlay of lesser 
amounts or shorter durations than the contract 
premium. If a contract premium is due, the 
premium outlay shall not be left blank or show 
zero unless accompanied by an asterisk or 
similar mark to draw attention to the fact that 
the policy is paid. 

(14) If the a pplicant plans to use dividends or policy 
values, guaranteed or non-guaranteed , to pay all 
or a portion of the contract premium or policy 
charges, or for any other purpose, the illustra- 
tion may reflect those plans and the effect on 
future policy benefits and values. 

(b) Narrative Summary. A basic illustration shall include 
the following: 

(1) A brief description of the policy being illus- 
trated, including a statement that it is a life 
insurance policy. 

(2) A brief description of the premium outlay or 
contract premium, as a pplicable, for the policy. 
For a policy that does not require payment of a 
specific contract premium, the illustration shall 
show the premium outlay that must be paid to 
guarantee coverage for the term of the policy, 
that must be paid to guarantee coverage for the 
term of the policy, subject to maximum premi- 
ums allowable to qualify as a life insurance 
policy under the a pplicable provisions of the 
Internal Revenue Code. 

(3) A brief description of any policy features, riders 
or options, guaranteed or non-guaranteed . shown 
in the basic illustration and the effect they may 
have on the benefits and values of the policy. 

(4) Identification and a brief definition of column 
headings and key terms used in the illustration. 

(c) Numeric Summary. 

(1) Following the narrative summary, a basic illus- 
tration shall include a numeric summary of the 
death benefits and values and the premium 
outlay and contract premium, as a pplicable. For 
a policy that provides for a contract premium. 



the guaranteed death benefits and values shall be 
based on the contract premium. This summary 
shall be shown for at least policy years 5^ 10 
and 20 and at age TO^ if applicable, on the three 
bases shown below. For multiple life policies 
the summary shall show policy years 5^ JO^ 20 
and 30. 

(A) Policy guarantees: 

(B) Insurer's illustrated scale; 

(C) Insurer's illustrated scale used but with the 
non-guaranteed elements reduced as follows: 



m 



m 



(iii) 



Dividends at 50 percent of the dividends 
contained in the illustrated scale used; 
Non-guaranteed credited interest at rates 
that are the average of the guaranteed rates 
and the rates contained in the illustrated 
scale used; and 



m 



£dl 



All non-guaranteed charges, including but 

not limited to. term insurance charges. 

mortality and expense charges, at rates 

that are the average of the guaranteed rates 

and the rates contained in the illustrated 

scale used. 

In addition, if coverage would cease before 

policy maturity or age 100. the year in which 

coverage ceases shall be identified for each of 

the three bases. 

Statements. Statements substantially similar to the 



following shall be included on the same page as the numeric 
summary and signed by the a pplicant, or the policy owner 
in the case of an illustration provided at time of delivery, as 
required in this Section. 

(1) A statement to be signed and dated by the 
a pplicant or policy owner reading as follows: ^ 
have received a copy of this illustration and 
understand that any non-guaranteed elements 
illustrated are subject to change and could be 
either higher or lower. The agent has told me 
they are not guaranteed." 

(2) A statement to be signed and dated by the 
insurance producer or other authorized represen- 
tative of the insurer reading as follows: ^ 
certify that this illustration has been presented to 
the a pplicant and that I have explained that any 
non-guaranteed elements illustrated are subject to 
change. I have made no statements that are 
inconsistent with the illustration." 

(e) Tabular Detail. 

(1) A basic illustration shall include the following 

for at least each policy year from one to 10 and 

for every fifth policy year thereafter ending at 

age 100. policy maturity or final expiration, and 

except for term insurance beyond the 20th year, 

for any year in which the premium outlay and 

contract premium, if applicable is to change: 

(A) The premium outlay and mode the applicant 

plans to pay and the contract premium, as 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1735 



PROPOSED RULES 



applicable; 

(B) The corresponding guaranteed death benefit, as 
provided in the policy; and 

(C) The corresponding guaranteed value available 
u pon surrender, as provided in the policy. 

(2) For a policy that provides for a contract pre- 
mium, the guaranteed death benefit and value 
available upon surrender shall correspond to the 
contract premium. 

(3) Non-guaranteed elements may be shown if 
described in the policy. In the case of an illus- 
tration for a policy on which the insurer intends 
to credit terminal dividends, they may be shown 
if the insurer's current practice is to pay termi- 
nal dividends. If any non-guaranteed elements 
are shown they must be shown at the same 
durations as the corresponding guaranteed ele- 
ments, if any. If no guaranteed benefit or value 
is available at any duration for which a 
non-guaranteed benefit or value is shown, a zero 
shall be displayed in the guaranteed column. 

Staiutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 

.0506 STANDARDS FOR SUPPLEMENTAL 
ILLUSTRATIONS 

(a) A supplemental illustration may be provided as long 
as: 

(1) It is appended to, accompanied by or preceded 
by a basic illustration that complies with this 
Section: 

(2) TTie non-guaranteed elements shown are not 
more favorable to the policy owner than the 
corresponding elements based on the scale used 
in the basic illustration; 

(3) It contains the same statement required of a 
basic illustration that non-guaranteed elements 
are not guaranteed; and 

(4) For a policy that has a contract premium, the 
contract premium underlying the supplemental 
illustration is equal to the contract premium 
shown in the basic illustration. For policies that 
do not require a contract premium, the premium 
outlay underlying the supplemental illustration 
shall be equal to the premium outlay shown in 
the illustration. 

(h) The supplemental illustration shall include a notice 
referring to the basic illustration for guaranteed elements 
and other important information. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 

.0507 DELIVERY OF ILLUSTRATION AND 
RECORD RETENTION 

£a} If a basic illustration is used by an insurance agent or 



other authorized representative of the insurer in the sale of 
a policy and the policy is applied for as illustrated, a copy 
of that illustration, signed in accordance with this Section, 
shall be submitted to the insurer at the time of policy 
application. A copy also shall be provided to the applicant. 

(b) If the policy is issued other than as applied for, a 
revised basic illustration conforming to the policy as issued 
shall be sent with the policy. The revised illustration shall 
conform to the requirements of this Section, shall be labeled 
"Revised Illustration" and shall be signed and dated by the 
applicant or policy owner and producer or other authorized 
representative of the insurer no later than the time the policy 
is delivered. A copy shall be provided to the insurer and 
the policy owner. 

(c) If no illustration is used by an insurance agent or 
other authorized representative in the sale of a policy or if 
the policy is applied for other than as illustrated, the 
producer or representative shall certify to that effect in 
writing on a form provided by the insurer. On the same 
form the applicant shall acknowledge that no illustration 
conforming to the policy applied for was provided and shall 
further acknowledge an understanding that an illustration 
conforming to the policy as issued will be provided no later 
than at the time of policy delivery. This form shall be 
submitted to the insurer at the time of policy application. 

(d) If the policy is issued, a basic illustration conforming 
to the policy as issued shall be sent with the policy and 
signed no later than the time the policy is delivered. A 
copy shall be provided to the insurer and the policy owner. 

(e) If the basic illustration or revised illustration is sent to 
the applicant or policy owner by mail directly from the 
insurer, it shall include instructions for the applicant or 
policy owner to sign the duplicate copy of the numeric 
summary page of the illustration for the policy issued and 
return the signed copy to the insurer. The insurer's obliga- 
tion under this subsection shall be satisfied if it can demon- 
strate that it has made a diligent effort to secure a signed 
copy of the numeric summary page. Tlie requirement to 
make a diligent effort shall be deemed satisfied if the insurer 
includes in the mailing a self-addressed postage prepaid 
envelope with instructions for the return of the signed 
numeric summary page. 

(f) A copy of the basic illustration and a revised basic 
illustration, if any, signed as applicable, along with any 



certification that either no illustration was used or that the 
policy was applied for other than as illustrated, shall be 
retained by the insurer until three years after the policy is 
no longer in force. A copy need not be retained if no 
policy is issued. 

Statutory Authority G.S 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 

.0508 Ar^TJAL REPORTS AND NOTICES TO 
POLICY OWTNfERS 

(a) In the case of a policy designated as one for which an 
illustration will be issued, the insurer shall provide each 



1736 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



policy owner with an annual report on the status of the 
policy that shall contain the in information specified in this 
Rule. 

(b) For universal policies, the report shall include the 
following: 

(1) The beginning and end date of the current report 

period: 

The policy value at the end of the previous 

report period and at the end of the current report 

period: 

The total amounts that have been credited or 



£21 



m 



debited to the policy value during the current 
period, identifying each by type (e.g.. interest, 
mortality, expense and riders'): 
{4} The current death benefit at the end of the 
current report period on each life covered by the 
policy: 

(5) The net cash surrender value of the policy as of 
the end of the current report period: 

(6) The amount of outstanding loans, if any, as of 
the end of the current report period: and 

(7) For fixed premium policies: If. assuming 
guaranteed interest, mortality and expense loads 
and continued scheduled premium payments, the 
policy's net cash surrender value is such that it 
would not maintain insurance in force until the 
end of the next reporting period, a notice to this 
effect shall be included in the report: or 

(8) For flexible premium policies: If. assuming 
guaranteed interest, mortality and expense loads. 
the policy's net cash surrender value will not 
maintain insurance in force until the end of the 
next reporting period unless further premium 
payments are made, a notice to this effect shall 
be included in the report. 

(c) For all other policies, where applicable, the report 
shall contain: 

(It Current death benefit; 

Annual contract premium: 
Current cash surrender value: 



{5} 
{6} 



Current dividend: 

A pplication of current dividend: and 

Amount of outstanding loan. 
(d) Insurers writing policies that do not build nonforfei- 
ture values shall only be required to provide an annual 
report with respect to these policies for those years when a 
change has been made to nonguaranteed policy elements by 
the insurer. 

£e} If the annual report does not include an in force 
illustration, it shall contain the following notice displayed 
prominently: "IMPORTANT POLICY OWNfER NO- 
TICE; You should consider requesting more detailed 
information about your policy to understand how it may 
perform in the fiiture. You should not consider replacement 
of your policy or make changes in your coverage without 
requesting an in force illustration. You may annually 
request, without charge, such an illustration by calling 



[insurer's phone number], writing to fin surer' s name] at 
Finsurer's address] or contacting your agent. If you do not 
receive an in force illustration within 30 days from your 
request, you should contact your state insurance depart- 
ment. " The insurer may vary the sequential order of the 
methods for obtaining an in force illustration. 

(f) Upon the request of the policy owner, the insurer shall 
furnish an in force Illustration of current and future benefits 
and values based on the insurer's present illustrated scale. 
This illustration shall comply with the requirements of 
Section 6A. 6B. 7A and 7E. No signature or other ac- 
knowledgment of receipt of this illustration shall be re- 
quired. 

£gl If an adverse change in any non-guaranteed element 
that could affect the policy has been made by the insurer 
since the last annual report, the annual report shall contain 
a brief notice of that fact prominently displayed. Notice on 
a separate sheet entitled "ALERT!" shall describe the nature 
of die ch3nge(s). the potential effect of the change(s') and the 
reasons the company felt the change was necessary. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 

.0509 ANNUAL CERTIFICATIONS 

(a) The board of directors of each insurer shall appoint 
one or more illustration actuaries. 

(b) The illustration actuary shall certify that the disci- 
plined current scale used in illustrations is in conformity 
with the Actuarial Standard of Practice for Compliance with 
the NAIC Model Regulation on Life Insurance Illustrations 
promulgated by the Actuarial Standards Board, and that the 
illustrated scales used in insurer-authorized illustrations meet 
the requirements of this Section. 

(c) The illustration actuary shall: 

(1) Be a member in good standing of the American 
Academy of Actuaries: 

(2) Be familiar with the standard of practice regard- 
ing life insurance policy illustrations: 

(3) Not have been found by the Commissioner, 
following appropriate notice and o pportunity for 
hearing to have: 

(A) Violated any provision of. or any obligation 
imposed by. the insurance law or other law in 
the course of Jus or her dealings as an illustra- 
tion actuary: 

(B) Been found guilty of fraudulent or dishonest 
practices: 

(C) Demonstrated his or her incompetence, lack of 
cooperation, or untrustworthiness to act as an 
illustration actuary: or 

(D) Resigned or been removed as an illustration 
actuary within the past five years as a result of 
acts or omissions indicated in any adverse 
report on examination or as a result of a 
failure to adhere to generally acceptable actu- 
arial standards: 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1737 



PROPOSED RULES 



(4) Not fail to notify the Commissioner of any 
action taken by an insurance regulator of another 
state similar to that under Subparagraph (c)(3) of 
this Rule; 

(5) Disclose in the annual certification whether, 
since the last certification, a currently payable 
scale applicable for business issued within the 
previous five years and within the scope of the 
certification has been reduced for reasons other 
than changes in the experience factors underly- 
ing the disciplined current scale. If 
non guaranteed elements illustrated for new 
policies are not consistent with those illustrated 
for similar in force policies, this must be dis- 
closed in the annual certification. If 
non guaranteed elements illustrated for both new 
and in force policies are not consistent with the 
nonguaranteed elements actually being paid, 
charge, or credited, this must be disclosed in the 
annual certification; and 

(6) Disclose in the annual certification the method 
used to allocate overhead expenses for all illus- 
tration: 

(A) Fully allocated expenses: 

(B) Marginal expenses; or 

(C) A generally reco^zed expense table based on 
fully allocated expenses representing a signifi- 
cant portion of insurance companies and ap- 
proved by the [National Association of Insur- 
ance Commissioners or by the Commissioner^ 

(d) The illustration actuary shall file a certification with 
the board and with the Commissioner: 

(1) Annually for all policies for which illustrations 
are used; and 

(2) Before a new policy is illustrated. 

If an error in a previous certification is discovered, the 
illustration actuary shall notify the board of directors of the 
insurer and the Commissioner promptly. 

(e} If an illustration actuary is unable to certify the scale 
for any policy illustration the insurer Intends to use, the 
actuary shall notify the board of directors of the insurer and 
the Commissioner promptly of his or her inability to certify. 

(f) A responsible officer of the insurer, other than the 
illustration actuary, shall certify annually that the illustration 
formats meet the requirements of this Section and that the 
scales used in insurer-authorized illustrations are those 
scales certified by the illustration actuary. 

(g) The annual certifications shall be provided to the 
Commissioner each year by a date determined by the 
insurer. 

(h) If an insurer changes the illustration actuary responsi- 
ble for all or a portion of the company's policies, the 
insurer shall notify the Commissioner of that fact promptly 
and disclose the reason for the change. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-58-40; 58-60- 
15; 58-60-20; 58-63-15; 58-63-65. 



Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to amend rules cited as 11 NCAC 6A .0201, .0217, 
.0225 - .0226, .0234 - .0236, .0240, .0301 - .0302, .0304 

- .0306, .0402, .0410, .0413, .0501, .0701 - .0705, .0808 

- .0810; and adopt rules cited as 11 NCAC 6A .0417, 
.0813, .0901 - .0904. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 10:00 a.m. on 
December 5, 1995 at the Dobbs Building, 3rd Floor Hearing 
Room, 430 N. Salisbury Street, Raleigh, NC 27611. 

Reason for Proposed Action: Needed to comply with 
changes made in statutes during last session of the General 
Assembly. 

Comment Procedures: Written comments and questions 
should be directed to Tony Higgins, 430 N. Salisbury Street, 
Raleigh, NC 27611, (919) 733-4935. Oral presentations 
may be made at the public hearing. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government fiinds. 

CHAPTER 6 - AGENT SERVICES DIVISION 

SUBCHAPTER 6A - AGENT SERVICES DIVISION 

SECTION .0200 - DESCRIPTION OF FORMS 

.0201 GENERAL INFORMATION 

All forms pertaining to licensure including applications, 
bonds, appointments, termination of appointments and other 
forms necessary for the daily operation of the Division in 
fulfilling its purpose shall be supplied by the Division, In 
addition, the Division will provide instructions for proper 
completion of all forms. 

(1) Forms Shall be completed in fiill and must contain 
necessary signatures in order to be accepted. 
Companies and applicants shall submit all forms 
or complete other requirements within time sched- 
ules established by the Division. 

(2) Companies or applicants that are authorized to 
duplicate forms must do so without alteration or 
modification thereto. 

(3) If any additional supporting documents, informa- 
tion or fees are required, they shall be submitted 
with the appropriate forms or applications. 

(4) The Division shall allow appointments, termina- 
tions of appointments, and the transfer of funds 
for payment of fees to be done through an elec- 
tronic medium. The medium shall meet all re- 



1738 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



quirements as established and approved by the 
State Auditor. 



Statutory Authority G.S. 58-2-40; 58-33-25(n); 
40(c), (d),(e).(f); 5 8-3 3 -5 5 (a), (b); 58-33-125(a). 



Mil 



58-33- 



NORTH CAROLINA NOTICE OF 
CANCELLATION 

(a) The "North Carolina Notice of Cancellation" shall 
include the name of the company, address of the company 
licensing office, name of the limited representative or 
adjuster, type of license to be canceled, company number, 
signature of authorized company representative and other 
pertinent information. 

(h) The Division shall allow terminations of appointments 
to be done throunh an electronic medium. The medium 
shall meet all requirements as established and approved by 
the State Auditor. 

Statutory Authority G.S. 58-2-40; 58-33-55(a)(b). 

.0225 APPOINTMENT OF NORTH CAROLINA 
AGENT 

(a) The "Appointment of North Carolina Agent" form 
shall include personal information, insurance authority for 
which ap)p)ointed, company NAIC number, effective date of 
the appointment, signature of authorized company official 
and other information to aid the Division in recording the 
appointment. 

(b) The Division shall allow appointments to be done 
through an electronic medium. The medium shall meet all 
requirements as established and a pproved bj^ the State 
Auditor. 

Statutory Authority G.S. 58-2-40; 58-33-40(e). 

.0226 TERMINATION OF NORTH CAROLINA 
AGENT APPOINTMENT, LTD 
REPRESENTATIVE AND ADJUSTER 

(a) The "Termination of North Carolina Agent Appoint- 
mentj^ Limited Representative and Adjuster " form shall 
include personal information, insurance authority being 
terminated, signature of authorized company official, 
company number, effective date of termination, and other 
information to aid in the recording of the termination of 
authority. 

(b) The Division shall allow a ppointments to be done 
through an electronic medium. The medium shall meet all 
requirements as established and approved by the State 
Auditor. 

Statutory Authority G.S. 58-2-40; 58-33-40(e). 

.0234 RESIDENT SURPLUS LINES LICENSE 
RENEWAL 

The "Resident Renewal Application for Lioonso to Ropro 
oont a Surplus Linos Insurer (Form RSL 1)" shall contain 



personal information and other pertinent information to aid 
th e Divioion in d a termining if the applioant'o lio e no e should 
bo ronowod. — It must b e sign e d b)' th e applioant and nota 
rizod. Each year the Division shall send to each surplus 
lines licensee an invoice for the license renewal fee. Upon 
receipt of the renewal fee by the Division the license shall 
be renewed and a new license shall be mailed to the li- 
censee. The applicant must be a member of a surplus lines 
advisory organization at the time of application for renewal. 



Statutory Authority G.S. 
65(d), (f). 



.0235 



58-2-40; 58-21-40(d); 58-21- 



CORPORATE SURPLUS LINES 
APPLICATION 

The "Corporate Surplus Lines Application" shall contain 
pertinent information concerning the corporation, the names 
of surplus lines licensees within the corporation and condi- 
tions for the issuance of the license and shall include 
appropriate signatures. This form ia used for both now and 
renewal applicontg. As used in this Rule, "corporation" 
includes a limited liability company as described in G.S. 
57C. and a partnership, limited partnership or registered 
limited liability partnership as described in G.S. 59. 

Statutory Authority G.S. 58-2-40; 58-21 -65 (c)(d). 

.0236 APPLICATION FOR 

CORPORATE/PARTNERSHIP INSURANCE 
LICENSE 

The "Application for Corporate/Partnership Insurance 
License" shall contain pertinent information concerning the 
corporation/partnoF ^ap corporation or partnership and other 
information that is relevant in aiding the Division in deter- 
mining if the applicant meets eligibility requirements for 
licensing. The application must be signed and notarized. 
As used in this Rule, "corporation or partnership" includes 
a limited liability company as described in G.S. 57C. and a 
partnership, limited partnership or registered limited liability 
partnership as described in G.S. 59. 

Statutory Authority G.S. 58-2-40; 58-33-25 (h); 58-33-30(a). 

.0240 NONRESIDENT SURPLUS LENJES 
LICENSE RENEWAL 

Th e "Non R e sid e nt R e newal Application for Lic e ns e to 
R e pr e s e nt a Surplus Lin e s Insur e r (Form NRSL 1)" shall 
contain personal information and othor portinont information 
to aid tho Divioion in dotormining if the applicant's liconao 
should bo ren e w e d. It must b e sign e d by th e applicant and 
notarized. Each year the Division shall send to each surplus 
lines licensee an invoice for the license renewal fee. Upon 
receipt of the renewal fee by the Division the license shall 
be renewed and a new license mailed to the licensee. The 
applicant must be a member of a surplus lines advisory 
organization at the time of application for renewal. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1739 



PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-21-40(d); 58-21-650. 
SECTION .0300 - EXAMINATIONS 

.0301 TYPES OF EXAMINATIONS 

Types of examinations administered for licensing are life, 
aooid e nt and health; aooid e nt and hoalth: Fir e and oaoualty; 
property and liability; Medicare supplement/long term care; 
auto physical damage; adjusters; hail adjusters; title; and 
surplus lines. Additional oxaminations may b e or e ated and 
administorod at the dioor e tion of th e Commission e r. 

Statutory Authority G.S. 58-2-40; 58-2 1-65 (b)(3); 58-33- 
30(e). 

.0302 FORM OF EXAMINATIONS 

All examinations shall bo in V i 'ritton and may be in 
objective or essay form. A physically handicapped individ- 
ual whose ability to write is impaired or lost and a visually 
handicapped individual may have special assistance from 
other individuals acting as readers or recorders. Applicants 
requiring special assistance must request in writing such 
assistance by the filing deadline of the examination. 
Verification of handicaps and a statement of all assistance 
needed must be included at the time of application. 

Statutory Authority G.S. 58-2-40; 58-33-30(e). 

.0304 RESPONSIBILFrY OF APPLICANT AT 
EXAMINATION SITE 

Applicants are responsible at the examination site for the 
following: 

(1) Apphcants who have pro rogistorod and who have 
not previously failed the same examination must 
bring to the examination site the tick e t of admio 
sieft Certificate of Course Comple- 
tion/Examination Admission Ticket, their confir- 
mation numbers obtained from the Service at time 
of registration, and two forms of proof of identity, 
one of which must be photo bearing. 

(3) AppUoanta who wish to take tho oxamination on a 

walk in baoio and who hav e not proviouoly failod 
th e sam e e xamination muot bring to th e e xamina 
tion site a properly complotod application, two 
forms of proof of idontit)', ono of which must bo 
photo boaring, and proper fooo. 

(5) (2} Applicants who have previously failed an 
examination may retake the examination in accor- 
dance with instructions furnished by the Commis- 
sioner and must pay applicable fees for each 
administration. 

f4) £3} Examination fees must be paid by company 
check, certified check, cashier's check or money 
order, made payable to the Service. 

(5) (4) Applicants taking the life, aooid e nt and health, 
accident and health or firo and oasualt)' Medicare 
supplement/long term care, or property and 






liability examination are required to bring to the 
examination site a "Cortifioat e of Pr e lio e noing 
Cours e Compl e tion" "Certificate of Course Com- 
pletion/Examination Admission Ticket" validated 
by an approved prelicensing school or by the 
Division indicating that the applicant has success- 
fully completed the mandatory prelicensing educa- 
tion requirements as specified in G.S. 
58-33-30(d)(2). The "C e rtificate of Proliconsing 
Cours e Compl e tion" "Certificate of Course Com- 
pletion/Examination Admission Ticket" is valid for 
45 three months from the date of course comple- 
tion or a maximum of five examination sittings, 
whichever occurs first . A — "C e rtifioato — ef 
Pr e lic e nsing Cours e Compl e tion" is valid for 60 
days from tho dato of iasuo for those waiving tho 
proliconsing education roquiromont. 

(5) No applications will be supplied at the exami- 
nation site for completion by applicants; nor will 
required supplies be furnished to applicants. 

(6) Applicants must arrive at the examination site 
at the time specified in the current examination 
schedule. 



Statutory Authority G.S. 58-2-40; 58-33-30(d)(2); 58-33- 
30(e); 58-33-125. 

.0305 ADMINISTRATION OF EXAMINATION 

Applicants should shall expect the examination to be 
administered using, among others, the following procedures: 

(1) Applicants shall present to the test site personnel 
ujxin request the applicable items described in 1 1 
NCAC 6 A .0304(1) through (5) (4). 

(2) Applicants should follow carefully all instructions 
given by the examination proctors , particularly 
when comploting tho answer shcot . 

(3) Applicants are not permitted to take calculators, 
textbooks, other books or papers into the examina- 
tions. Applicants found to have any of these 
materials or other aids will not be allowed to 
continue the examination. 

(4) Th e ansv i 'or shooto muot contain only id e ntification 
data and r e spons e s to oxam qu e stions. — No orcxiit 
will bo givon to any applicant for any marks or 
answers mado in tho oxamination booklet. All 
examinations will be administered in a form 
prescribed by the Commissioner. 

(5) Applicants may leave the examination room only 
after obtaining permission from the examination 
proctors and handing in exam materials. No extra 
time will be allowed for completing the examina- 
tion. 

(6) Any applicant who gives or receives assistance 
during the examination will be required to turn in 
all exam materials immediately and leave the 
room. Under these circumstances, the applicant's 
answer sheet will not be scored and the relevant 



1740 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



m- 



facts will be reported by the proctors to the 

Commissioner. 

An applioant may tak e only one e xamination on 

any given oxam date. 



Statutory Authority G.S. 58-2-40; 58-3 3-30(e). 

.0306 REGISTRATION FOR EXAMINATION 

Application for examination and lioonsuro must bo post 
mark e d no lat e r than th e publioh e d filing d e adlin e for 
applicants who wioh to pro rogioter to tak e tho examination. 
A soparato application for examination and lioonguro muot 
bo made for each kind of inouranoo for which an Individual 
wiohoo to b e e xamin e d. An applicant for examination must 
register with the Service. 

Statutory Authority G.S. 58-2-40; 58-33-30(e). 

SECTION .0400 - LICENSING PROCEDURES 

.0402 LICENSING OF RESIDENT AGENT, LTD 
REPRESENTATIVE AND ADJUSTER 

(a) Applicants must meet minimum qualifications as stated 
in G.S. 58-33-30. 

(b) An agent licensed to sell life, accident and health has 
authority to sell variable contracts provided the agent is 
licensed to sell securities through the Secretary of State, 
holds a current NASD registration, (series 6 or 7 and 63) 
and is appointed by a company authorized to sell variable 
annuities and variable Ufe products in North Carolina. The 
company is responsible for verifying that the agent has met 
all NASD requirement. 

(c) A limited representative must be licensed with each 
company for which he will solicit business. No solicitation 
shall begin by the applicant until he has received such 
license. 

(d) Responsibility of companies for forms and fees: 

(1) Companies shall make application for limited 
representatives and company/firm adjusters to be 
licensed. 

(2) Companies shall have on file with the Division 
the address of one central licensing office and 
the individual within such office to which all 
corresfiondence, licenses, and invoices will be 
forwarded. 

(3) Companies shall have on file with the Division 
the name of the individual responsible for all 
agent appointments, termination of agent ap- 
pointments and agent Ucense applications submit- 
ted by the company to the Division. 

(4) Companies shall submit to the Division company 
checks for the proper amount due. 

(e) Responsibility of the agent: 

(1) An applicant who is subject to the examination 
shall submit to th e S e rs'io e th e candidat e guid e 
application along with a company chock, corti 
Tied chock, caohior's chock or monoy order in 



tho appropriate amount, complv with the re- 
quirements of Section .0300 of this Subchapter. 

(2) An agent shall be responsible for verifying 
licensure to a company prior to being appointed. 

(3) A person, after surrender or termination of a 
license for such period of time that he is no 
longer eligible for waiver of the examination, 
shall meet all legal requirements for previously 
unlicensed persons. 

(4) Any Ucensee licensed under Chapter 58, Article 
33 of the North Carolina General Statutes shall 
notify the Division in writing of any change of 
residence or business address within 30 days of 
such change. 

(5) An ag e nt whos e lio e noo torminat e o booauoo of 

inactivity shall be allowed to reapply within two 
years after tho Ucouflo to r iuinatoo without having 
to moot education and oxamination requiromonto. 
If th e ag e nt's lic e nse terminat e s a sooond time as 
a result of continued inactivity', tho agont up>on 
application shall bo required to moot all oduca 
tion and e xamination r e quiromonto. 

£5} Every licensee shall, upon demand from the 
Division, furnish in writing any information 
relating to the licensee's insurance business 
within 10 business days of such demand. 

(f) Responsibility of the service: 

(1) The service shall administer the examination for 
life, accident and health; fire and oasunlt)'' 
property and liability; automobile physical 
damage; adjusters; hail adjusters; title; accident 
and health; and surplus lines. 

(2) The service shall issue pass or fail notices for 
each examination administered, without refer- 
ence to numeric scores, within two weeks of 
testing. 

(3) The service shall notify the Division of score 
reports for all examinations administered within 
one week of testing. 

(4) The service shall meet the requirements of its 
contract with the Commissioner in a timely 
manner. 

(g) Responsibility of the Division: 

(1) Up)on receipt of score reports from the service, 
the Division shall issue appropriate licenses to 
qualified applicants. 

(2) For eligible applicants, the Division shall issue 
a 90-day temporary license. For additional 
information refer to 11 NCAC 6A .0410. 

(h) An applicant for a resident license shall, if applicable, 
obtain an original letter of clearance from his former state 
of residency certifying the kinds of insurance for which the 
applicant was licensed, that all licenses held in that state 
have been canceled and that the applicant was in good 
standing in that state at the time of the cancellation of 
licenses. A letter of clearance shall be valid for no more 
than 60 days from date of issuance. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1741 



PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-2- 195 (a); 58-33-30; 
58-33-65. 

.0410 TENrPORARY LICENSE 

(a) A temporary license is available only to persons 
described in G.S. 58-33-65(a). 

(b) The company shall submit to the Division the applica- 
tion for temporary license^ at tho same timo tho applicant 
forwards the candidate guide application to tho aor i 'ioo. 

(c) Successful completion of the examination within 90 
days from the date a temporary license is issued will oauo e 
tho temporary' liconao to be changed to result in the issuance 
of a permanent license. 

(d) Unsuccessful completion of, or failure to take the 
examination within 90 days from the date a temporary 
license is issued, will cause immediate cancellation of the 
temporary hcense. The company shall return the temporary 
license to the Division immediately. 

(e) Applicants for temporary license under G.S. 
58-33-65(a)(l),(2) will follow the procedures outlined in this 
Rule. In addition, an authorized company official shall send 
a letter to the Division requesting a temporary license and 
stating the reason applicant is applying. 

Statutory Authority G.S. 58-2-40; 58-33-65. 

.0413 LICENSING OF 

CORPORATION/PARTNERSHIPS 

(a) An applicant must meet minimum qualifications as 
stated in G.S. 58-33-30. 

(b) An applicant shall submit application forms with a 
company check, certified check, cashier's check or money 
order. 

(c) A corporation making first time application and 
domiciled in North Carolina shall provide proof of corporate 
status by submitting a copy of its Articles of Incorporation 
certified by the North Carolina Secretary of State. 

(d) A foreign corporation making first time application 
shall provide proof of corporate status by submitting a copy 
of its appUcation for Certificate of Authority certified by the 
North Carolina Secretary of State. 

(e) Partnerships making first time application shall submit 
a copy of the filing with the count)' olerk'o Registrar of 
Deed's office of the county where the partnership business 
is being conducted. TTiis copy shall be certified by the 
county cl e rk Registrar of Deeds or notarized by a notary 
public. 

(f) An applicant shall file with the Division a list of all 
companies contracted with the firm along with the names 
and social security numbers of the agents representing each 
company. 

(g) Any addition or deletion of an agent or company shall 
be submitted on a form prescribed by the Commissioner 
within 30 days of any such change in the corporate repre- 
sentation. 

(h) For licensing purposes a Limited Liability Corporation 
(LLP and a Limited Liabilirs' Partnership (LLP) shall 



qualify to be licensed as a Corporation. A LLC or LLP 
applying to be licensed shall submit a copy of its Certificate 
of Existence issued by the North Carolina Secretary of 
State. 

Statutory Authority G.S. 58-2-40; 58-33-17. 

.0417 REQUIREMENTS FOR PRE NEED 
LIMTTED REP. AGENT 

Individuals applying to be licensed to sell prearrangement 
insurance, as defined in G.S. 58-60-35(a)(2), shall submit a 
North Carolina Limited Insurance Representative Applica- 
tion and appropriate fees. Applicants must also submit 
evidence that they are licensed to sell pre-need contracts 
under G.S. 90, Article 13D. 

Statutory Authority G.S. 58-2-40; 58-33-25(e)(12). 

SECTION .0500 - RENEWAL AND 
CANCELLATION OF LICENSES 

.0501 RENEWAL OF AGENT APPTS: 

LICENSES/LEVnTED REPS: COMPANY 
ADJUSTERS 

(a) Annually the Division will notify each company of 
dates and procedures for renewing agent appointments and 
limited representative and adjuster licenses. Companies will 
be given at least 30 days" advance notice of the last date the 
Division will process terminations. 

fb) On the date specified by the Division as the last date 
to submit terminations, the Division shall cease processing 
all terminations and bill companies for renewals. All 
appointments and licenses will automatically be renewed 
unless the Division has received a termination request from 
the company within the specified time. 

(c) Each company will be sent an invoice stating the total 
amount of money due. Companies shall remit a check made 
payable to the North Carolina Department of Insurance in 
the amount of the Invoice. Any discrepancies claimed by 
companies will be investigated only after full payment is 
received. 

(d) Upon receipt of the company check, the Division will 
mail to the company a list of all appointments and licenses 
renewed. 

(e) Appointments recorded and licenses issued prior to the 
renewal date, but after the date specified by the Division as 
the last date to process termination will be considered valid 
until the following year. 

(f) Annually the Division will, upon written request and 
payment of prescribed fee, provide to any company a list of 
all appointees or licensees. 

(g) Failure of a company to pay any quarterly or annual 
invoice within the time prescribed shall automatically result 
in the cancellation of all appointees or licensees of that 
company. No new appointments or licenses shall be issued 
until all outstanding invoices have been paid. 



1742 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-33-40(f); 58-33-55; 58- 
33-125(a). 

SECTION .0700 - PRELICENSDVG EDUCATION 

.0701 GENERAL REQUIREMENTS 

(a) This Section applies to individuals attenqjting to obtain 
a resident license to solicit lif e, accident and health, firo and 
oaauolt)' or accident property and liability and health 
insurance in North Carolina except as specifically exen^ted 
by 11 NCAC 6A .0701(b) and (c). 

(b) Individuals who are exempt from the requirement for 
a written examination pursuant to G.S. 5 8 33 35(1), (3), and 
(4) 58-33-35(3) and (4) are exempt from prelicensing 
education requirements. 

(c) Individuals who satisfy the following are exempt from 
prelicensing education requirements: 

(1) Life , aooid e nt and health: 

(A) Certified Employee Benefits Specialist 
(CEBS); or 

(B) Fraternal Insurance Counselor (FIC); or 

(C) Life Underwriter Training Council Graduate 
(LUTC Graduate); or 

(D) Certified Financial Planner (CFP). 

(2) Property and liability: Fire and casualty! 

(A) Accredited Advisor in Insurance (AAI); or 

(B) Associate in Claims (AIC); or 

(C) Associate in Insurance Accounting and Finance 
(AIAF); or 

(D) Associate in Premium Auditing (APA); or 

(E) Associate in Risk Management (ARM); or 

(F) Associate in Underwriting (AU); or 

(G) Certified Insurance Counselor (CIC); or 

(H) Holder of Certificate in General Insurance 

aNS). 

(3) Accident and health: 



(A) — Aflsociato in Life and Health Claims (ALHC); 



(B) — C e rtifi e d Employ ee Benefito Sp e oialiot 

(CEBS); or 
(€) — Holder of Health Inouranco Agaociation of 

America Cortifioate; or 
^D) — R e giot e r e d H e alth Und e rwrit e r (RHU). 
f4) (3} lif e, accident and health, and property and 
liability: firo and oaoualty and accident and 
h e alth: 

(A) Holder of degree in insurance (associate or 
bachelors); or 

(B) An individual whose license in another state or 
jurisdiction for the same kind of insurance as 
that for which applied has been canceled 
within 60 days of the Division's receipt of the 
letter of clearance and the individual's request 
for waiver of prelicensing education; or 

(C) An individual who is currently licensed in 
another state or jurisdiction for the same kind 
of insurance as that for which applied. 



(d) If an applicant exempted from prelicensing education 
under the provisions of 11 NCAC 6A .0701(c) fails the 
examination, the applicant must successfully meet North 
Carolina's mandatory prelicensing education requirement 
prior to retaking the examination. 

(e) In this Section, unless otherwise noted the following 
definitions will apply: 

(1) "Classroom School" shall mean an entity that 
provides prelicensing education sponsored by a 
company, agency, association or educational 
institution by an instructor utilizing a teaching 
curriculum based on the outline. 

(2) "Correspondence Course" shall mean home, 
self, individual, or correspondence study utiliz- 
ing programmed text instructions. 

(3) "Correspondence School" shall mean an entity 
that provides prelicensing education sponsored 
by a company, agency, association or educa- 
tional institution through completion of a corre- 
spondence course that has been approved by the 
Commissioner, with students individually super- 
vised by an approved instructor. 

(4) "Instructional Hour" shall mean a 60 minut e 50- 
minute hour. 

(5) "Instructor" shall mean an individual approved 
by the Commissioner to instruct in a classroom 
school who is responsible for preparation and 
presentation of lesson plans to assure that the 
outline is taught to that school's students and 
who prepares a final course examination; and in 
a correspondence school to assist and supervise 
students in the completion of an approved corre- 
spondence course. 

(6) "Outline" shall mean the instructor/examination 
content outlines prepared and published by the 
Department in the "State of North Carolina 
Insurance Licensure Examination Candidate 
Guide". 

(7) "Program Director" shall mean the individual 
associated with an approved classroom or corre- 
spondence school who is responsible for the 
administration of that school according to 11 
NCAC 6A .0702(1). 

(f) Applicants shall request from the Commissioner 
permission to meet the prelicensing education requirement 
through correspondence. This written request shall include 
an explanation as to why the applicant is unable to attend 
classroom courses. 

Statutory Authority G.S. 58-2-40; 58-33-30(d); 58-33-35; 
58-33-132. 

.0702 PRELICENSING EDUCATION SCHOOLS 

(a) This Rule applies to all classroom and correspondence 
schools offering a prelicensing course prescribed by General 
Statute 58-33-30. All schools desiring to conduct a 
prelicensing course shall be approved by the Commissioner 



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1743 



PROPOSED RULES 



prior to commencement of the courses. 

(b) A school seeking approval to conduct a prelicensing 
course shall make written application to the Commissioner 
upon a form prescribed by the Commissioner. 

(c) After due investigation and consideration, approval 
shall be granted to the school when it is shown to the 
satisfaction of the Commissioner that: 

(1) the school has submitted all information required 
by the Commissioner; 

(2) the course to be conducted complies with 1 1 
NCAC 6A .0704; and 

(3) the program director has been approved by the 
Commissioner in accordance with 1 1 NCAC 6A 
.0703; 

(4) the school has an approved instructor to teach 
each line of insurance for which they are seeking 
approval; and 

(5) schools requesting approval to operate as a 
correspondence school must also have and 
maintain an approved active classroom schedule. 

(d) The following guidelines shall apply to the approval 
of classroom and correspondence schools: 

(1) Approval extends only to the course and location 
reported in the application for approval. 

(2) Approval shall terminate on June 30 next follow- 
ing the date of issuance. 

(3) A school must renew annually its approval to 
conduct prelicensing courses by submitting an 
application for approval not later than May 3 1 of 
each year. 

(e) The Commissioner shall deny, revoke, ef suspend^^ or 
terminate approval of any school upon finding that: 

(1) the school has refused or failed to comply with 
any of the provisions of 1 1 NCAC 6A .0702, 
.0703, .0704, or .0705 , or .0706 ; or 

(2) any school official or instructor has obtained or 
used, or attempted to obtain or use, in any 
manner or form. Examination questions; or 

(3) the school's students have a first-time licensing 
examination performance record that is deter- 
mined by the Commissioner to be substantially 
below the performance record of all first-time 
examination candidates; or 

(4) the school has not conducted at least one 
prelicensing course during any 12-month 
2^ month period; or 

(5) the school has refused or failed to submit infor- 
mation or properly-completed forms prescribed 
by the Commissioner within the required time 
frames. 

(f) In all proceedings to deny, revoke, ef suspend^^ or 
terminate approval of a school, the provisions of Chapter 
150B of the General Statutes shall be applicable. 

(g) When a school's approval is discontinued, the proce- 
dure for reinstatement shall be to apply as a new school, 
with a statement of the reasons that the school is now 
eligible for reconsideration. The Commissioner may require 



an investigation before new approval is granted. 

(h) If a school's approval has been suspended upon the 
Commissioner's finding that the school has not conducted at 
least one prelicensing course during any 12-month 2^ month 
period, that school may reapply after one year of suspen- 
sion. At such time, the school will be given six 43 months 
to conduct at least one prelicensing course. 

(i) The following guidelines shall apply for changes 
during any approved year: 

( 1 ) A school shall obtain advance approval from the 
Commissioner for any change of course location 
or schedule information. Requests for approval 
of such changes shall be in writing. 

(2) An approved school that intends to terminate its 
prelicensing program, other than during the 
annual renewal jjeriod, shall notify the Commis- 
sioner in writing. 

(3) A school shall notify the Commissioner in 
writing of a change of textbook. 

(j) An approved school may utilize, for advertising or 
promotional purposes, examination performance data made 
available to the school by the Commissioner, provided that 
any data disclosed by the school shall be accurate, shall be 
presented in a manner that is not misleading, and shall: 

(1) be limited to the annual examination perfor- 
mance data for the particular school and for all 
examination candidates in the state; 

(2) include the type of examination, the time period 
covered, the number of first-time candidates 
examined, and either the number or percentage 
of first-time candidates passing the examination; 
and 

(3) be reviewed and approved by the Commissioner 
in writing prior to publication. 

(k) A classroom school's facilities and equipment shall 
have been found by appropriate local building, heating and 
fire inspectors to be in compUance with all applicable local, 
state and federal laws and regulations regarding safety, 
sanitation, and access by handicapped persons. 

(1) The school shall designate one person as the program 
director. The program director shall be responsible for 
administrative matters such as recruiting, evaluating and 
certifying the qualifications of instructors, developing 
programs, scheduling of classes, advertising, maintaining 
facilities and equipment, recordkeeping and supervising of 
the prelicensing program. 

(m) A school shall publish and provide to all prelicensing 
students prior to enrollment a bulletin or similar official 
publication of that school that contains the following 
information: 

(1) name of school and publication date; 

(2) name of sponsor; 

(3) all associated costs; 

(4) detailed outline or description of all prelicensing 
courses offered. 

(n) With the exception of correspondence courses, a 
school shall file with the Commissioner information giving 



1744 



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PROPOSED RULES 



exact dates, times, locations, and instructor name for each 
scheduled prelicensing course. This infonnation may be 
submitted either at the beginning of each quarter/semester, 
or no later than one week prior to the first class meeting of 
each prelicensing course. 

(o) Classroom schools shall retain the following material 
on file at one location for a minimum of three years: 

(1) class schedules; 

(2) advertisements; 

(3) bulletins, catalogues, and other official publica- 
tions; 

(4) grade reports^ showing a numeric grade for each 
student ; 

(5) attendance records; 

(6) master copy of each final course examination, 
indicating the answer key, the school name, 
course location, course dates and name of in- 
structor; 

(7) list of student names, with social security num- 
bers, for each course, and the name of the 
Instructor; and 

(8) student registration information. 

All files shall be made available to the Commissioner upon 
request. 

(p) Correspondence schools shall retain the following 
material on file at one location for a minimum of three 
years: 

(1) advertisements; 

(2) bulletins, catalogues and other official publica- 
tions; 

(^ maotor oopy of oaoh final oouroo examinatie ft^ 

indicating tho answer key; 

(4) (3} grade reports; 

(5) {4) a Ust of student names, with social security 
numbers, for each course, and the name of the 
instructor; and 

(6) £5) student registration information that must be 
obtained prior to the distribution of course 
material. 

All files shall be made available to the Commissioner upon 
request. 

(q) In the event of illness, injury or death of an instruc- 
tor, the program director may utilize a non-approved 
instructor to complete a course. The school shall thereafter 
suspend operation of its prelicensing courses until an 
approved instructor is available. 

Statutory Authority G.S. 58-2-40; 58-33-30(d); 58-33-132. 

.0703 PROGRAM DIRECTORS 

(a) All program directors shall be approved by the 
Commissioner in accordance with the provisions of this 
Section. 

(b) A person desiring approval as a program director 
shall make written application to the Commissioner upon a 
form prescribed by the Commissioner. 

(c) Applications must be endorsed by the president/chief 



operating officer of the sponsoring educational institution, 
covapany, agency or association. If the employing school is 
not currently approved by the Commissioner, an application 
for school approval shall be submitted along with the 
application for program director approval. 

(d) The Commissioner shall approve an applicant as a 
program director upon finding that the applicant is recom- 
mended by the president/chief operating officer of the 
sponsoring educational institution, company, agoicy or 
association has submitted all information required by the 
Commissioner, possesses good character and reputation, 
and: 

(1) Holds a baccalaureate or higher degree and has 
at least two years of experience as an instructor 
of insurance or as an educational administrator; 
or 

(2) Holds a baccalaureate or higher degree and has 
at least six years of experience in the insurance 
industiy with a minimum of two years of experi- 
ence in insurance management; or 

(3) Possesses qualifications that are found by the 
Commissioner to be substantially equivalent to 
those described. 

(e) Program director approval shall be valid for an 
indefinite period, subject to future changes in laws or 
regulations regarding approval of program directors. 

(f) The Commissioner shall deny, revoke, ef suspend^, or 
terminate the approval of any program director upon finding 
that: 

(1) The program director fails to meet the criteria 
for approval provided by these regulations; or 

(2) The program director has failed to comply with 
any provisions of 1 1 NCAC 6A .0700; or 

(3) The program director's employment has been 
terminated by any sponsoring educational institu- 
tion/company; or 

(4) The program director provided false information 
to the Commissioner when making application 
for approval; or 

(5) The program director has at any time had an 
insurance license denied, suspended, er revoked^^ 
or terminated by this or any other insurance 
department, or has ever been required to return 
a license while under investigation; or 

(6) The program director has obtained or used, or 
attempted to obtain or use, in any manner or 
form, examination questions; or 

(7) The program director has failed to utilize an 
acceptable level of performance in directing the 
insurance prelicensing program. 

(g) In all proceedings to deny, revoke, &f suspend^^ or 
terminate approval, the provisions of Chapter 150B of the 
General Statutes shall be applicable. 

(h) When a program director's approval is discontinued, 
the procedure for reinstatement shall be to apply as a new 
program director, with a statement of the reasons that he is 
now eligible for reconsideration. The Commissioner may 



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November 15, 1995 



1745 



PROPOSED RULES 



require an investigation before new approval is granted. 

(i) An approved program director shall inform the 
Commissioner of any change in program affiliation by filing 
an application for program director approval prior to 
directing a new program. 

(j) Full-time faculty of fully accredited senior level 
colleges and universities who regularly teach risk and 
insurance courses shall be deemed to meet the eligibility 
requirements of this Section. 

(k) The program director is responsible for the actions of 
the approved school's instructors. 

Statutory Authority G.S. 58-2-40; 58-33-30(d); 58-33-132. 

.0704 COURSES 

(a) This Rule establishes minimum standards for lifer 
Qccidont and health, property and liability. Medicare 
supplement, and long term care fir e and oaoualt)' and 
aooid e nt and hoalth prelicensing courses prescribed by 
General Statute 58-33-30. 

(b) Insurance prelicensing programs shall consist of any 
of the following courses: 

(1) life , aooid e nt and health insurance; 

(2) property and liability firo and oasunlty insurance; 
and 

(3) Medicare supplement and long term care aooi 
dont and h e alth insurance. 

(c) The maximum length of an approved prelicensing 
education course shall be at the discretion of the school. In 
no event shall a school offer a life , aooid e nt and health or 
prop>ertv and liability fire and oaoualty course of fewer than 
40 hours or an acoidont and health a Medicare supplement 
and long term care course of fewer than 10 30 hours. 

(d) The following requirements are course standards: 

(1) All courses shall consist of Instruction in the 
subject areas covered in the outline. 

(2) Courses may also include coverage of related 
subject areas not prescribed by the Commis- 
sioner; however, such courses must provide 
additional class time, above the minimum re- 
quirement stated in Rule .0704(c) of this Sec- 
tion, for the coverage of such subject areas. 

(3) Prelicensing courses are intended for instruc- 
tional purposes only and not for promoting the 
interests of or recruiting employees for any 
particular insurance agency or company. 

(4) Schools shall establish and enforce academic 
standards for course completion that reasonably 
assure that students receiving a passing grade 
possess adequate knowledge and understanding 
of the subject areas prescribed for the course. 
In any course for which college credit is 
awarded, the passing grade for such course shall 
be the same as the grade that is considered 
passing under the school's uniform grading 
system. 

(5) Schools shall conduct a final comprehensive 



course examination that covers all subject areas 
prescribed by the Commissioner for each course. 
Schools may allow a student to make up a 
missed examination or to retake a failed exami- 
nation in accordance with policies adopted by 
the school. No final examination shall be given 
until a student has completed the instructional 
requirement. 

(6) Students shall attend a minimum of 40 hours of 
life , aooident and health or property and liability 
fir e and oasunlty instruction or a minimum of 30 
10 hours of Medicare supplement and long term 
care accident and hoalth instruction. Time set 
aside for breaks, pop-tests, quizzes, the final 
comprehensive course examination and other 
non-instructional activities shall not count toward 
the minimum instructional requirement. If a 
life , aooid e nt and health or property and liability 
ooounlt)' course is scheduled for 50 or more 
instructional hours, a student shall attend at least 
80 percent of the total hours offered by the 
course. 

(7) Schools shall make available for purchase, at the 
first class meeting of each course, the State of 
North Carolina Insurance Licensing Examination 
Candidate Guide at the fee designated by the 
Department. 

(e) The following requirements shall be met for schedul- 
ing purposes: 

(1) Class meetings or correspondence courses shall 
be limited to a maximum of eight hours of 
instruction in any given day. 

(2) Classroom courses shall have fixed beginning 
and ending dates and may not be conducted on 
an open-entry/open-exit basis. 

(3) Correspondence courses shall not have fixed 
beginning and ending dates and shall be con- 
ducted on an open-entry basis. 

(0 The following shall apply to the use of text books: 

(1) Choice of classroom course text shall be at the 
discretion of each school. 

(2) Text books used in correspondence courses shall 
be approved by the Commissioner before use. 

(g) All prelicensing classroom school courses shall be 
taught by instructors who have been approved by the 
Commissioner. 

(h) All prelicensing correspondence courses shall be 
monitored by instructors who have been approved by the 
Commissioner. An instructor shall be designated for each 
correspondence course student. 

(i) The following certification of course completion 
procedures shall apply: 

(1) Schools shall furnish validate each student who 
successfully completes a prelicensing course an 
official certificate on a form prescribed by the 
Commissioner. A certificate shall not be issued 
te validated for a student prior to completion of 



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PROPOSED RULES 



all course requirements and the passing of the 
course's comprehensive final examination. 

(2) A Certificate of Course Completion/Examination 
Admission Ticket cortificato — of proliccai s ing 
oourao oomplotion shall be iaguod validated for 
each course successfully completed by a student. 
A certificate presented at the examination site 
that indicates completion of more than one 
course shall be invalid. 

(3) A Certificate of Course Completion/Examination 
Admission Ticket o e rtifioat e — of prolioenoing 
ooufoo oomplotion shall be valid for access to 
the examination for 43 three months or a maxi- 
mum of five examination attempts, whichever 
occurs first . If an applicant for a license does 
not successfully pass the examination within 43 
three months or five examination attempts in the 
3-month period , he shall again compl e t e a meet 
the prelicensing education oouro e requirement to 
be eligible for the examination. 

Statutory Authority G.S. 58-2-40; 58-33-30(d); 58-33-132. 

.0705 INSTRUCTORS 

(a) All instructors shall be approved by the Commissioner 
in accordance with the provisions of this Rule. 

(b) A person desiring approval to teach or proctor 
prelicensing courses shall make written application to the 
Commissioner upon a form prescribed by the Commis- 
sioner. 

(c) The Commissioner shall approve an applicant as an 
instructor upon finding that the applicant has submitted all 
information required by the Commissioner, possesses good 
character and reputation, and possesses the appropriate 
qualifications described in this Paragraph: 

(1) Uf e, accident and health: 

(A) Chartered Life Underwriter (CLU); or 

(B) Chartered Financial Consultant (ChFC); or 

(C) Fellow Life Management Institute (FLMI); or 

(D) Life Underwriter Training Council Fellow 
(LUTCF); or 

(E) Four years of experience as a full-time em- 
ployee or representative interpreting or ex- 
plaining insurance policy contracts in the lifer 
accident and health industry and a designation 
as: 

(i) Certified Employee Benefits Specialist 

(CEBS); or 
(ii) life Underwriter Training Council Gradu- 
ate (LUTC Graduate); or 
(iii) Fraternal Insurance Counselor (FlC); or 
(iv) Certified Financial Planner (CFP); or 
(v) Holder of degree in insurance (associate or 
bachelors); or 

(F) Seven years of exp>erience as a full-time em- 
ployee or representative interpreting or ex- 
plaining insurance policy contracts in the lifey 



aooidont and health industry; or 
(G) A combination of training, experience and 
qualifications that are substantially equivalent 
to those listed among 11 NCAC 6A 
.0705(c)(1)(A) through (F) to satisfy the Com- 
missioner that the applicant is qualified. 
(2) Property and liability: Fir e and oosualty: 

(A) Chartered Property and Casualty Underwriter 
(CPCU); or 

(B) Four years of experience as a full-time em- 
ployee or representative interpreting or ex- 
plaining insurance policy contracts in the 
property and Uability firo and casualty industry 
and a designation as: 

(i) Associate in Underwriting (AU); or 
(ii) Program in General Insurance (INS); or 
(iii) Accredited Advisor in Insurance (AAI); or 
(iv) Associate in Claims (AIC); or 
(v) Associate in Risk Management (ARM); or 
(vi) Certified Insurance Counselor (CIC); or 
(vii) Associate in Premium Auditing (APA); or 
(viii) Associate in Insurance Accounting and 
Finance (AIAF); or 
(ix) Holder of degree in insurance (associate or 
bachelors); or 

(C) Seven years of experience as a full-time em- 
ployee or representative interpreting or ex- 
plaining insurance policy contracts in the 
property and liability fire and casualty' indus- 
try; or 

(D) A combination of training, experience and 
qualifications that are substantially equivalent 
to those listed among 1 1 NCAC 6A 
.0705(c)(2)(A) through (C) to satisfy the 
Commissioner that the applicant is qualified. 

(d) An applicant for instructor shall be approved for each 
course taught or proctored in the prelicensing curriculum. 

(e) The Commissioner shall deny, revoke, ef suspend^, or 
terminate the approval of an instructor upon finding that: 

(1) The instructor fails to meet the criteria for 
approval provided by these regulations; or 

(2) The instructor has failed to comply with the 
Commissioner's regulations regarding 
prelicensing courses or schools; or 

(3) The instructor's employment has been termi- 
nated by any school approved by the Commis- 
sioner on the grounds of incompetence or failure 
to comply with institutional policies and proce- 
dures; or 

(4) The instructor provided false information to the 
Commissioner on any form or application; or 

(5) The instructor has at any time had an insurance 
license denied, suspended ef revoked^ or termi- 
nated by this or any other insurance department, 
or has ever been required to return a license 
while under investigation; or 

(6) The instructor has obtained or used, or at- 



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1747 



PROPOSED RULES 



tempted to obtain or use, in any manner or form, examina- 
tion questions; or 

(7) The instructor has failed to employ acceptable 
instructional principles and methods; or 

(8) The instructor's students have a first-time licens- 
ing examination performance record that is 
determined by the Commissioner to be substan- 
tially below the performance record of all first- 
time examination candidates. 

(f) In all proceedings to deny, revoke, or suspendj. or 
terminate approval of an instructor, the provisions of 
Chapter 150B of the General Statutes shall be applicable. 

(g) When an instructor's approval is discontinued, the 
procedure for reinstatement shall be to apply as a new 
instructor, with a statement of reasons that he is now 
eligible for reconsideration. The Commissioner may require 
an investigation before new approval is granted. 

(h) Instructor proctoring duties are prescribed by the 
Commissioner and a description may be obtained by writing 
to the North Carolina Department of Insurance, Agent 
Services Division, Prelicensing Education Section, Post 
Office Box 26267, Raleigh, NC 27611. 

(i) An individual who instructs or proctors for an ap- 
proved school shall be responsible for verifying to that 
school's program director that he has been approved by the 
Commissioner as an instructor. 

(j_J Additional instructor requirements shall be the same as 
those for instructors as provided in H. NCAC 6A .OSOSfd) 
through (f). 

Statutory- Authority G.S. 58-2-40; 58-33-30(d); 58-33-132. 

SECTION .0800 - CONTINUING EDUCATION 

.0808 INSTRUCTOR QUALIHCATION 

(a) Instructor quahfication requirements shall be the same 
as those for instructors as provided in 1 1 NCAC 6A 
.0705(c), except that the Commissioner may approve 
instructors possessing specific areas of expertise to instruct 
courses comprising those areas of expertise. 

fb) Insurance company trainers as instructors must be full 
time salaried employees of the insurance company sponsor- 
ing the course and must have as part of their full time 
responsibilities the duty to provider insurance company 
training. 

(c) College and university' instructors may be full time or 
adjunct faculty' of the accredited college or university', must 
be teaching a curriculum course in his or her field of 
expertise, and must meet the requirements of the association 
that accredits the college or university. 

(d) The Commissioner shall require applicants and current 
instructors to submit to a personal interview, provide a 
video or audio tape, a written history of courses taught or 
any other documentation that will \'erify the applicant's 
qualifications to instruct approved insurance courses. 

(e) Temporary instructor authority shall be given to each 
qualified applicant. The instructor authority shall become 



permanent after six months unless otherwise denied, 
suspended, terminated or revoked by the Commissioner. 

(f) As a condition to continued instructor approval, 
instructors shall teach one prelicensing or continuing 
education course each calendar year beginning in 1996. 

Statutory Authority G.S. 58-2-40; 58-33-130; 58-33-132. 

.0809 APPROVAL OF COURSES 

(a) Providers of all courses specifically approved under 
11 NCAC 6A .0803 must file copies of program catalogs, 
course outlines, copies of advertising literature, a 
nonrefundable, nontransferable filing fee of one hundred 
dollars ($100.00) per course up to a two thousand five 
hundred dollar ($2,500) per calendar year maximum, and 
any other documents or related materials that the Commis- 
sioner requests, prior to January 1. 1991, and within 30 
days of any changes to such programs in the future. 

(b) All providers of courses not specifically approved 
under 11 NCAC 6A .0803 must do the following: 

(1) Any individual, school. Insurance company, 
insurance industry association, or other organi- 
zation intending to provide classes, seminars, or 
other forms of instruction as approved courses 
shall apply on forms provided by the Commis- 
sioner; pay a nonrefundable, nontransferable 
filing fee of one hundred dollars (SlOO.OO) per 
course up to a two thousand five hundred dollar 
($2,500) per calendar year maximum and pro- 
vide the requested number of copies of detailed 
outlines of the subject matter to be covered, 
copies of handouts to be given, the qualifications 
of each instructor, and other information re- 
quested by the Commissioner to support the 
request for approval. 

(2) Providers of supervised individual study pro- 
grams must file the requested number of copies 
of the study programs. Extra copies will be 
returned to a provider after course approval if a 
return fee is paid in advance. 

(3) Such applications and accompanying information 
must be received by the Commissioner at least 
30 days prior to the intended beginning date of 
the course. 

(4) The Commissioner shall approve or deny the 
application; and shall indicate the number of 
ICECs that have been assigned to the course if 
approved. If a course is not approved or disap- 
proved within 60 days after receipt of all re- 
quired information, the course is deemed to be 
approved at the end of the 60-day period. 

(5) If a course approval application is denied, a 
written explanation of the reason for such action 
shall be furnished with the denial. 

(c) Course approval applications must include all of the 
following forms and attached information in exactly the 
following order: 



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PROPOSED RULES 



(1) A cover letter with payment of et the 
nonrefundable, nontransferable filing fee of one 
hundred dollars ($100.00) per course attached 
with separate paragraphs for the following: 

(A) a request that the course be evaluated; 

(B) for whom the course is designed; 

(C) the course objectives; 

(D) the names and duties of all persons who will 
be affiliated in an official capacity with the 
course; 

(E) the course provider's tuition and fee refund 
policy; and 

(F) an outline that shall include a statement of the 
method used to determine whether there will 
be meaningful attainments of education by 
licensees to be certified upon their satisfactory 
completion of the course. Such method may 
be a written examination, a written report, 
certification of attendance only, or other meth- 
ods approved by the Commissioner. The 
outline shall describe the method of presenta- 
tion; 

(2) TTie course content outline with instruction hours 
assigned to the major topics; 

(3) Instructor approval a pplication qualification form 
and instructor qualification documentation or 
resume if not proviouoly approv e d ; 

(4) Schedule of dates, beginning and ending times 
and places the course will be offered, along with 
the names of instructors for each course session. 
Schedules shall be submitted at least 30 days in 
advance of any subsequent course offerings but 
it will not be necessary that courses be resubmit- 
ted unless there are substantial changes in con- 
tent; aa4 

(5) A copy of the course completion certificate.- i 

(6) A course rating form; 

(7) A course bibliography. 

(d) The Commissioner may waive any part of this Section 
for programs offered by the University of North Carolina 
system schools or the North Carolina Department of 
Community Colleges. 

(e) A provider may request that its materials be kept 
confidential if they are of a proprietary nature. The 
Commissioner will review and promptly return such extra 
copies of materials if a return fee is paid in advance. 

(f) Courses awarded more than six ICECs must have an 
Insurance Department approved exam for the student to get 
full credit; otherwise, the limitations of 11 NCAC 6A 
.0806(c) will apply. 

(g) Cancelled course schedules must be submitted five 
days before the scheduled course offering. All students 
scheduled to attend the cancelled course must be informed 
of the cancellation. 

(h) Course rosters shall be submitted within 15 business 
days after course completion in accordance with 11 NCAC 
6A ■0803(d). 



Statutory Authority G.S. 58-2-40; 58-33-130; 58-33-132. 

.0810 ADVERTISING 

(a) Courses shall not be advertised as approved for ICECs 
unless such approval has been granted by the Commissioner 
in writing. 

(b) When a course has been approved for ICECs and is 
advertised as such, the advertisement shall include: 

(1) the provider name, assigned provider number, 
course(s) title(s). teoA assigned course numbert 
course(s) date(s) and course location: 

(2) the number of approved ICECs; 

(3) the type of Ucensee for whom the course would 
be most applicable; afi4 

(4) all fees and associated expenses^ ^ and 

(5) course rating. 

(c) Advertisements shall be complete, truthful, clear, and 
not deceptive or misleading. 

(d) The Commissioner may withdraw his approval of any 
violator to provide or conduct courses. 

Statutory Authority G.S. 58-2-40; 58-33-130; 58-33-132. 

.0813 ISSUANCE/CONTINUATION OF 
PROVIDER APPROVAL 

(a) Any individual or entity intending to provide classes, 
seminars, or other forms of Instruction as approved courses 
shall submit: 

(1) an a pplication as approved by the Commissioner 
for provider a pproval: and 

(2) a course approval application in accordance with 
11 NCAC 6A .0809. 

(b) The Commissioner shall approve or deny the provider 
and course approval application. 

(c) Any provider a pproval that is denied shall be fur- 
nished a written explanation for the denial in accordance 
with 1 1 NCAC 6A .0809(4). 

(d) Any provider receiving a provider approval denial 
shall have 15 business days to respond to the denial: 
previously submitted materials will be destroyed: and the 
one hundred dollar ($100.00) nonrefundable, nontransferable 
course filing fee shall be forfeited if the applicant fails to 
respond within the required timeframe. 

(e) As a condition to continued provider a pproval, 
providers shall conduct a minimum of one course within the 
State of North Carolina each calendar year beginning in 
1996. 

Statutory Authority G.S. 58-2-40; 58-33-130; 58-33-132. 

SECTION .0900 - PUBLIC ADJUSTERS 

.0901 DEFINrriONS 

As used in this Section: 

(1) "Public adjuster" means any individual who, for 

salary, fee, commission, or other compensation. 

engages in public adjusting and who is licensed 



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November 15, 1995 



1749 



PROPOSED RULES 



under G.S. 58-33-30 or who is authorized to 
adjust under G.S. 58-33-70; but does not mean an 
attorney at law, licensed to practice by the North 
Carolina State Bar, who adjusts insurance losses in 
the course of the practice of law. 
(2) "Public adjusting" means investigating, reporting 

to, and assisting an insured in relation to First 
party claims arising under insurance contracts, 
other than life or annuity, that insure the real or 
personal property, or both, of the insured; but 
does not include acting in any manner in relation 
to liability claims for personal injury or property 
damage, other third party claims, nor physical 
damage to motor vehicles. 

Statutoiy Authority G.S. 58-2-40; 58-33-10(b); 58-33-25(a); 
58-33-30; 58-33-70. 

.0902 TRANSACTIONS WITH E^SUREDS 

(a) A public adjuster shall in aU respects be fair and 
honest with an insured and in all communications with an 
insurer or its representatives. 

£b) A public adjuster shall have no fmancial interests in 
any aspect of an insured's claim, other than the salary, fee, 
commission, or compensation that may be established in the 
written contract betueen the insured and the public adjuster. 

(c) A public adjuster shall not refer or direct any insured 
needing repairs or other services in connection with a loss 
to any person with whom the public adjuster has a fmancial 
interest; nor to any person who will or is reasonably 
anticipated to provide the public adjuster any direct or 
indirect compensation for the referral of any resulting 
business. 

(d) A public adjuster shall not prevent or attempt to 
dissuade an insured from communicating with an insurer, 
the insurer's adjuster, an independent adjuster representing 
the insurer, an attorney, or any other person, regarding the 
settlement of the insured's claim. 

(e) The public adjuster's full consideration for the public 
adjuster's services shall be stated in the written contract with 
the insured. If the consideration is based on a share of the 
insurance proceeds, the exact percentage shall be specified. 

(f) Any choice of counsel to represent the insured shall be 
made solely by the insured. 

(g) A public adjuster may not settle a claim unless the 
terms and conditions of the settlement are approved by the 
insured. 

fh) All contracts for the ser\'ices of public adjusters shall: 
(1) Legibly state the full name, as specified in the 
Department's records, of the licensed public 
adjuster who is the other party to the contract. 
Be signed by the public adjuster who solicited or 
in whose name the contract was solicited. 



(2) 



Show the insured's full name and street address, 
the address and description of the loss, and the 
name of the insured's insurance company and 
policy number, if available. 



(4) Show the date on which the contract was actu- 
ally signed by both parties. 

(5) Clearly and conspicuously disclose the insured's 
right to cancel or revoke the contract as speci- 
fied in 11 NCAC 6A .0904(e) of this Section. 

(6) Be in writing. 

(i) A public adjuster shall not acquire any interest in 
salvage prop>erty, except with the express written permission 
of the insured, after settlement with the insurer. 

Statutory Authority G.S. 58-2-40; 58-33- 10(b); 58-33-25 (a); 
58-33-30; 58-33-70; 58-33-76; 58-63-15(11). 

.0903 RELATIONSHIPS WITH THIRD PARTIES 

(a) No public adjuster shall compensate or provide any 
thing of value to a person who is not licensed as an adjuster 
under G.S. 58-33-30 in return for the referral of a business 
prospect to \hs public adjuster; provided, however, a public 
adjuster may enter into an agreement with another public 
adjuster for referral of business and sharing compensation. 

(b) No public adjuster shall represent or act as an adjuster 
representing an insurance company, either as an employee 
of the insurance company or as an independent adjuster. No 
independent adjuster or insurance company adjuster shall act 
as a public adjuster. 

Statutory Authority G.S. 58-2-40; 58-33- W(b); 58-33-25 (a); 
58-33-30; 58-33-70. 

.0904 REGULATORY MATTERS 

(a) A public adjuster shall not engage in the practice of 
law, as defined and interpreted under G.S. 84-2.1. 

(b) Only public adjusters shall solicit business from an 
insured who has sustained an insured loss. 

(c) All advertising by a public adjuster shall fairly and 
accurately describe the services to be rendered, shall not 
misrepresent either the public adjuster or the public ad- 
juster's abilities, and shall comply with the following 
requirements: 

(1) Only public adjusters residing in North Carolina 
licensed by the Department may advertise, 
whether in print, or in other media, within the 
State of North Carolina. Nonresident public 
adjusters licensed by the Department may not 
advertise, unless such advertising has first been 
approved by the Department. 

(2) An advertisement shall state the full name of the 
public adjuster and the public adjuster's firm. 

(d) No public adjuster shall solicit or enter into any 
agreement for the repair or replacement of damaged 
property on which the public adjuster has been engaged to 
adjust or settle claims. 

£ei If an insured enters into an agreement with a public 
adjuster to adjust a loss within three business days after the 
date of the loss, the insured shall have until the close of 
business on the third business day after the date of the loss 
to rescind the agreement. 



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November 15, 1995 10:16A 



PROPOSED RULES 



£fj The exercise of the right to rescind the agreement by 
the insured must be in writing and delivered to the public 
adjuster at the address shown on the agreement. 

(g) If the insured property that is the subject of the claim 
is not the primary residence of the insured or used by the 
insured primarily for personal, family, or household 
purposes, the insured may waive the right to rescind the 
agreement. The waiver must be in writing and signed by 
the insured. 

Cti) If the insured rescinds the agreement with a public 
adjuster in accordance with this provision, the public 
adjuster shall be entitled to payment by the insured for the 
reasonable value of the service rendered and any expenses 
incurred by the public adjuster prior to receiving notice of 
the rescission. 

(i) Every public adjuster shall maintain all records of 
losses and claims adjusted for three years after the settle- 
ment or closing of each claim. 

Statutory Authority G.S. 58-2-40; 58-3 3- 10(b); 58-3 3-25 (a); 
58-33-30; 58-33-70; 58-33-76; 58-63-15(2), (11). 



«**«««•***** 



* * « * « 



Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to amend rules cited as 11 NCAC IIB .0601 - 
.0602. .0604, .0607, .0610, .0612; and adopt rules cited as 
11 NCAC IIB .0616 - .0617. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 2:00 p.m. on 
December 4, 1995 at the Dobbs Building, 3rd Floor Hearing 
Room, 430 N. Salisbury Street, Raleigh, NC 27611. 

Reason for Proposed Action: Required by recent legisla- 
tion. 

Comment Procedures: Written comments cmd questions 
should be directed to Ray Martinez, 430 N. Salisbury Street, 
Raleigh, NC 27611, (919) 733-5633. Oral presentations 
may be made at the public hearing. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 11 - FINANCIAL EVALUATION 
DIVISION 

SUBCHAPTER IIB - SPECIAL PROGRAMS 

SECTION .0600 - WORKERS' COMPENSATION 
SELF-INSURANCE 

.0601 DEFINrriONS 

As used in this Section: 



(1) "Act" means G.S. 97, as amended. 

(2) "Certified audit" means an audit upon which an 
auditor duly qualified to practice as a public 
accountant or certified public accountant expresses 
his professional opinion that the accompanying 
statements fairly present the financial position of 
the employer or of the group, in conformity with 
generally accepted accounting principles as consid- 
ered necessary by the auditor under the circum- 
stances. 

(3) "Commiooion e r" — m a ono — the — Commiooionor of 

Inguronco or his authorized roproaontntivo. 

(JJ "Certified Public Accountant" or "CPA" means 
an independent certified public accountant or 
accounting firm in good standing with the Ameri- 
can Institute of Certified Public Accountants and 
in all states in which the CPA or firm is licensed 
to practice. 

(4) "Corporate surety" means an insurer authorized 
by the Commissioner to write surety business in 
North Carolina. 

(5) "Employer" means a self-insured individual 
employer. 

(6) "Fund year" means that elected period of cover- 
age, up to 12 months in duration, pursuant to 
which a group self-insurer extends coverage to its 
members. 

(7) "Group" means a self-insured group of employers. 

(8) "Loss fiind" means that portion of net or standard 
premium, exclusive of past due balances deemed 
to be delinquent, that covers the retention of 
liability for a self-insurer under the terms of an 
aggregate excess insurance contract; and means, in 
the absence of an aggregate excess policy, that 
portion of net or standard premium, exclusive of 
jjast due balances deemed to be delinquent, that is 
allocated to pay claims. 

(9) "Manual premium" means premium determined 
by multiplying the annualized payroll amount, 
segregated into the proper workers' compensation 
job classifications, by the applicable manual 
premium rates approved for the use in North 
Carolina. 

(10) "Qualified actuary" means a member in good 
standing of the Casualty Actuarial Society or a 
member in good standing of the American Acad- 
emy of Actuaries who has been approved as 
qualified for signing casualty loss reserve opinions 
by the Casualty Practice Council of the American 
Academy of Actuaries. 

(1 1) "Self-insurer" means either a self-insured individ- 
ual employer or self-insured group of employers. 

(12) "Service company" means a business that has 
contracted with an employer or group for the 
purpose of providing any or all services necessary 
to a self-insured program. 

(13) "Surplus" means all assets a loss fiind has on hand 



10:16A 



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November 15, 1995 



1751 



PROPOSED RULES 



that are in excess of all loss reserves and liabili- 
ties. 

(14) "Trustees" means the governing body of a group 
that is elected by its members for stated terms of 
office to direct the administration of a group; and 
whose duties include responsibility for approving 
applications for new members of such group. 

(15) "Trustees' fund" means any monetary fund under 
the control of the board of trustees of a group that 
is not part of the loss fund or that is not set aside 
to pay claims. 

Statutory Authority G.S. 58-2-40; 58-2-145; 58-2-171; 58-2- 
205; 97-93; 97-136. 

.0602 ADMINISTRATION - ALL SELF-INSURERS 

(a) Each self-insurer, as a condition of the authority to 
self-insure, shall provide proof of compliance with the 
provisions of this Section regarding its ability to operate a 
program of self-insurance, either through in-house capabili- 
ties or servicing companies. 

(b) Every self-insurer shall make provision for oomp e t e nt 
persons to administer and adjust claims. 

(c) If a self-insurer contracts with a service company, the 
Commissioner may shall use the service company as an 
intermediary in his dealings with the self-insurer if the 
Commissioner determines that this will result in a more 
rapid and accurate flow of information from the self-insurer 
and will aid in the self-insurer's compliance with this 
Section and the act. 

(d) Each self-insurer contracting with a service company 
shall notify' the Commisgionor within 30 days after th« 
contract execution provide a copy of the contract as well as 
any amendments to an existing contract to the Commis- 
sioner. 

(e) Each self-insurer and service company shall maintain 
its records in such manner to enable the Commissioner or 
any designated auditor examiner to verify the accuracy and 
completeness of all reports and documents that are submitted 
to the Commissioner pursuant to this Section, as well as all 
records and reports necessary to evaluate the financial 
solvency of the self-insurer and its ability to meet its 
obligations under the act. Such records shall be open to 
inspection by the Commissioner during regular business 
hours. Such records shall be retained for a period of time 
sufficient to ensure their availability for audit examination 
purposes. In the absence of other guidelines established by 
the Commissioner, all records shall be retained according to 
the schedule adopted by the Commissioner for insurers. 
The location of these records shall be within North Carolina 
and shall be made known to the Commissioner as necessary 
for audit examination purposes. A self insurer may kocp 
records outside of North Carolina; — provided, — that the 
oelf innurer ohall mok e such r e cords available for inop e otion 
within North Carolina within t a n days aft e r any r e qu e st for 

inspection by tho Commissionor. If a self insurer has 

contracted with a sor>'ico company for claims processing. 



tho 9olf insurer's claimg files and rolatod records may be 
locat e d at th e offioos of th e B e n i 'ioe oompany. 

ff) — Each oolf insur e r's and o e n i 'io e company's r e oordo 
may, for good cauao shown, bo audited. — If ordered, such 
audits shall bo p>orformo d — by accountants — or auditors 
d e signat e d by tho CommiBpionor. — Th e r e asonable ooot of 
Buoh audits shall b e born e by th e part)' e xamined. 

(g) £f) After For each audit examination conducted, a 
written report shall be prepared and submitted to the 
Commissioner in accordance with 11 NCAC IIC .0102 and 
.0103. with a copy to th e o e lf insur e r or o e p . 'ioe oompany, 
and such report shall bo a part of tho annual roviow for 
complianco with this Section. — jiSny doficioncios citod by tho 
audit report shall b e oonsidorod in d e termining wh e th e r there 
fnay — be — grounds — fof — the — susp e nsion, — r e vooation, — &f 
nonronowal — of tho — authority' — te — solf insure; — provided, 
howovor, that no solf insurer shall have its authority to 
s e lf insur e susp e nd e d, r e vok e d or not r e n e wed without a 
prior notic e and hearing b e for e th e Commission e r. 

Statutory Authority G.S. 58-2-40; 58-2-131; 58-2-132; 58-2- 
133; 58-2-145; 97-93; 105-228.9. 



.0604 REPORTS - ALL SELF-INSURERS 

(a) Each self-insurer shall submit to the Commissioner 
payroll information for the purpose of tax assessment as 
required by this Section. The Rules, classifications, and 
rates as set forth in the most recently approved workers' 
compensation and employers' liability insurance manual 
governs the audits of payrolls and the adjustments of 
premiums. Payroll information shall be submitted summa- 
rized by classification. Each self-insurer shall maintain true 
and accurate payroll records. Unless payroll records are 
maintained in such manner that a true and accurate identifi- 
cation and division by employer or group member depart- 
ments or divisions or occupational classifications can readily 
be determined for proper rating, the entire payroll of that 
employer or group member shall be presumed to be within 
the classification to which the highest workers" compensa- 
tion rate is applicable. 

(b) Each self-insurer shall on or before May 10 within 
1 8 days aft e r th e e nd of each cal e ndar year file with the 
Commissioner a statement of total workers" compensation 
benefits piaid by the self-insurer during the rcportod previous 
calendar year, as well as total future liability of all open 
claims, regardless of the dates of accidents. 

(c) Each your over>' oolf inouror shall fil e c e rtified audited 
financial statements with tho Commissioner. — Thoso state 



monts shall at a minimum comprise a balance — shoot, 
stat e m e nt of op e rations, stat e m e nt of oaoh flows, and all 
applicabl e not e s to th e financial statements. All self-insurers 
shall have an annual audit by a CPA and shall file an 
audited financial report with the Commissioner on or before 
May 10 for the previous calendar year. Two copies of this 
report shall be filed in the office of the Chief Examiner, 
Field Audit Section of the Department. Nonoortifiod intorim 
financial statements may bo required by the Commissioner 



1752 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



at the end of any fiocal qunitor of any oolondof month 
whonovor ho hofi good oauo e to b e li e vo thoro haa boon a 
dotoriomtion in tho finanoial oondition of a oolf inourer that 
advofooly affooto the oolf inourof 'o ability to pay oxpoctod 
looooo. 

(d^ — Extonoiono grant o d by th e Commiooion e r for good 
oauoo will bo limited to on e 15 day p e rio dr- 

(d) An extension of the May 10 filing date shall be 
granted by the Commissioner for a period of u^ to 45 days 
upon a showing by the self-insurer and its CPA of the 
reasons for requesting the extension. The request for 
extension must be submitted in writing not less than 15 days 
before May 10. 

(e) The annual certified audited financial report shall 
report the financial position of the self- insurer as of the 
most recent calendar or fiscal year in conformity with 
general accepted accounting principles. The annual certified 
audited financial report shall include the following: 

il} report of CPA; 

(2) balance sheet reporting assets, liabilities, capital, 
and surplus: 

(3) statement of operations: 

(4) statement of cash flows: 

(5) statement of changes in capital and surplus; and 

(6) notes to the financial statements: 

(f) In addition to the annual certified audited financial 
report, each self-insurer shall furnish the Commissioner with 
a copy of a report of matters noted in an audit related to the 
internal control structure. 

(g) A report of the evaluation by the CPA of the account- 
ing procedures of the self-insurer and its system of internal 
control, including any remedial action taken or prop>osed. 
shall be filed annually by the self-insurer with the Depart- 
ment at the time of the filing of the annual certified audited 
financial report. 

fh) The report shall follow the Form for Reports on 
Internal Control Structure Related Matters Noted in an Audit 
described in Volume J^ Section AU 325. of the Professional 
Standards of the American Institute of Certified Public 
Accountants. 

Statutory Authority G.S. 58-2-40; 58-2-145; 58-2-205; 97- 
93; 105-228.9. 

.0607 APPLICATION - EMPLOYERS 

(a) Each employer desiring to self-Insure shall make 
application to the Commissioner for such authority on a 
form prescribed by the Commissioner. This application 
shall be filed with the Commissioner at least 60 90 days 
prior to before the desired effective date of self-insurer 
status. The application shall be completed and shall be in 
the form of a swom statement. Until all roquootod requisite 
data has been filed, an application is incomplete. 

(b) In addition to the filing of the application, compliance 
with all of the following is required: 

(1) The applicant shall provide the Commissioner 
with certified audited financial statements for the 



most recent reporting period and the two next 
most recent years including, at a minimum, a 
balance sheet reporting assets, liabilities, and 
equity , a statement of operations, a statement of 
cash flows, and applicable notes to the financial 
statements prepared on the basis of generally 
accepted accounting principles consistently 
applied. 

(2) Specific excess insurance with actuarially appro- 
priate policy limits and retention amounto aooopt 
abl e to th e Commiooion e r, may shall be required 
for each applicant. 

(3) Each applicant shall have satiafy' tho Comm ts- 
oion e r that e ith e r it hoo, within its own organiza- 
tio n, amp le facilities and comp e t e n t personnel to 
administer and adjust claimg, claims: or shall 
contract with a service company to provide these 
services. 

(4) Each applicant shall submit a summary of 
workers' compensation benefits paid for the last 
three calendar years, as well as total future 
liability of all open claims. This summary shall 
indicate a breakdown as to benefits paid for 
medical and indemnity. 

(5) Each applicant with 20 or more full-time em- 
ployees shall submit a certificate or other evi- 
dence of safety insp)ection, completed before the 
application, that certifies that all safety require- 
ments of the North Carolina Department of 
Labor have been met. 

(c) Only an applicant whose employee base is actuarially 
sufficient in numbers and provides an actuarially appropriate 
spreading of risk and whose total fixed assets amount to five 
himdred thousand dollars ($500,000) or more is eligible to 
apply for authority to self-insure. In considering the 
financial strength and liquidity of the applicant to comply 
with the act, the Commissioner may shall consider , among 
othor evaluativ e crit e ria, the applicant's: organizational 
structure and management background; profit and loss 
history; source and reliability of financial information; 
compensation loss history; number of employees; claims 
administration; excess insurance; access to excess Insurance 
markets; and other significant financial ratios, in e aoh oao e 
that tho Commissioner may doom appropriate. 

(d) All financial statement formulations shall bo providod 
in Buoh detail ao to facilitate application of ratio and trend 
analysis. 

(e) Each applicant shall execute and file with the Com- 
missioner an agreement, which shall be part of his the 
application, wherein the applicant agrees to fully comply 
with the act and to deposit with the Commissioner cash, 
acceptable securities, or a surety bond issued by a corporate 
surety that will guarantee the applicant's compliance with 
this Section and with the act. 

(f) After considering the application and all supfHDrtive 
data, the Commissioner shall either grant authorization or 
deny authorization and advise the applicant of deficiencies 



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November 15, 1995 



1753 



PROPOSED RULES 



that constitute the basis for denial. If the deficiencies are 
resolved to th e Cominiooionor'o oatiofaotion within 30 60 
days of the date of Commissioner's notice, authorization 
shall be granted. 

(g) The applicant shall may, in tho discrotion of tho 
Commiooion e r, be granted additional time to remedy 
deficiencies in its application in order to meet the require- 
ments in this Section. A request for an extension of time 
shall be made in writing by the applicant within 30 days 
after notice of denial by the Commissioner. If th e Commis 
oion a r io not oatiofied that all requirements of this Section 
have not been met, the application shall be conaidored 
withdrawn. 

(h) Upon meeting the requirements of this Section, an 
applicant shall receive a written certificate of authority to 
self-insure. 

Statutory Authority G.S. 58-2-40; 97-93. 

.0610 APPLICATION - GROUPS 

(a) Application may be made to provide workers' com- 
pensation coverage for a group in accordance with the terms 
of an indemnity agreement. Application shall be made to 
the Commissioner for such privilege on forms provided 
proscribed by the Commissioner and shall be filed with the 
Commissioner at least 60 90 days prior before to the desired 
effective date of self-insured status. The application shall 
contain answers to all questions propounded and shall be in 
the form of a sworn statement. Until all requested data has 
been filed, an application is incomplete. 

(b) The application shall include without limitation to the 
following: 

(1) a copy of the bylaws of the proposed group; 

(2) an individual application of each member of the 
group applying for coverage in the group on the 
inception date of the group with a current finan- 
cial statement of the member ; 

(3) a current certified financial statement of each 
group, including at a minimum, a balance sheet 
reporting assets, liabilities, and surplus , a state- 
ment of operations, a statement of cash flows, 
and a statement showing the combined surplus 
or equity of all members applying for coverage 
on the inception date of the group. Such com- 
bined surplus or not worth equity shall be an 
amount that establishes the financial strength and 
liquidity of the businesses; 

(4) evidence of the financial ability of the group to 
meet its obligations under the act; 

(5) a composite listing of the estimated standard 
premium to be developed for each member 
individually and in total as a group. Payroll 
data for each of the three preceding years shall 
be furnished by risk classification; 

(6) documented agreement by each member to pay 
to the group not less than 25 percent of esti- 
mated annual manual premium not later than the 



initial day of coverage afforded by the group; 

(7) a confirmation of any required excess insurance 
underwritten by an authorized insurer; 

(8) designation of the initial trustees or administra- 
tor, or both; 

(9) proof of a fidehty bond, issued by an authorized 
insurer, covering the group administrator in a 
form provided by the Commissioner and an 
amount commensurate with the risk; accoptablo 
to th e Commiooion e r; 

(10) an indemnity agreement jointly and severally 
binding the group and each member thereof to 
comply with the provisions of the act and pay 
obligations imposed by the act;^ , which ohall 
conform to an ind e mnity' agr ee ment in a form 
accoptablo to tho Commiasionor; 

(11) a breakdown of all projected administrative 
expenses for the fund year in dollar amount and 
as a percentage of the estimated annual manual 
premium; 

(12) proof provided by the trustees, satisfactory to 
the Commissioner, that the employees base is 
sufficient in numbers and provides an appropri- 
ate spreading of risk; 

(13) proof, satisfactory to the Commissioner, that 
either the applicant has within its own organiza- 
tion ample facilities and competent personnel to 
service its own program with respect to under- 
writing matters, claims adjusting, and industrial 
safety engineering; or that the applicant will 
contract with a service company to provide these 
services and the reporting of loss data to the 
Commissioner. If any plan servicing is to be 
done by the applicant, biographies of those 
persons who will be responsible for or perform- 
ing such functions shall be submitted to the 
Commissioner with the application; 

(14) a letter of assent stipulating the applicant's 
acceptance of membership status in the North 
Carolina Self-Insurance Guaranty Association 
under Article 4 of the act. 

(c) After considering the application and all supportive 
data, the Commissioner shall either grant authorization or 
deny authorization and inform the applicant of deficiencies 
that constitute the basis for denial. If the deficiencies are 
resolved to th e Commisoion e r'o oatiofaotion within 30 60 
days ef after the Commissioner's notice, authorization shall 
be granted to the applicant. 

(d) The applicant shall may, in tho di o crotion of tho 
Commiooion e r, be granted additional time to remedy the 
deficiencies in its application in order to meet the require- 
ments of this Section. A request for an extension of time 
shall be made in writing by the applicant within 30 days 
after notice of denial by the Commissioner. If th e Commio 
oion e r io not oatiofi e d that all requirements of this Section 
have not been met, the application shall be conoidorod 
withdrawn. 



1754 



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November 15, 1995 10:16A 



PROPOSED RULES 



(e) Upon meeting the requirements of this Section, the 
applicant shall receive a written certificate of authority to 
self-insure. 

Statutory Authority G.S. 58-2-40; 58-2-145; 97-93. 

.0612 REPORTS - GROUPS 

(a) Reports as to fmancial condition, payroll records, 
coverage, accident experience, compensation payments, and 
other reports shall be filed with the Commissioner as 
follows: 

(1) Each group shall file with the Commissioner an 
annual financial statement in accordance with 
G.S. 58-2-165. within 1 8 dayo after tho oloo e 
of the fund y e ar a otnt e ment of flnonoial oondi 
tion, which otntomont shall Lncludo a report of 
tho outatanding workers' cotnponsation liabilities 
of tho group, including detailo of th e amount and 
oouroo of all monioo r e oov e rabl e from any third 
part)'. Financial otatomonta shall at a minimum, 
bo oompriood of a balance ohoot, a otatomont of 
oporationo, and a otat e mont of oaoh flowo. 

(2) Every group shall submit with its financial 
statement on an annmil hasm a report from a 
qualified actuary as dofinod in this Section of 
outstanding workers' compensation liabilities for 
each fund year. The Suoh report shall show 
liabilities, excess carrier and other qualifying 
credits, if any, and net retained liabilities. 

(3) Summary loss reports, formatted by classifica- 
tions as prescribed in the unit statistical plan of 
the principal workers' compensation rating 
organization in North Carolina, shall be filed. 
ao required by th e Conmiiooion efr 

(b) The failure or refusal of any group to file the reports 
sp)ecified in Paragraph (a) of this Rule within the time limits 
prescribed by this Section or by any provision of the act 
may be grounds for revocation, suspension, or nonrenewal 
of the authority to self-insure. 

(c) Every group member shall notify the group to which 
it belongs of any changes in the names, addresses, structure, 
or composition of any businesses or subsidiaries that 
participate in the group. Every group member shall notify 
the group of any additions or deletions of the businesses or 
subsidiaries participating in the group, including changes in 
majority ownership interest in any business or subsidiary 
that is covered or that will be covered by the group. All 
such changes shall be reported to the group within ten days 
after the effective date of the change. Upon receipt of such 
notice, each group shall notify the Commissioner, in 
writing, of such reported changes. 

{4r) — Any group that does not have tho record keeping 
capability required by this Section on Qctobor 1, 1990, must 
b e in oompliano e with this Section within 90 dayo th e r e after. 

Statutory Authority G.S 58-2-40; 58-2-145; 58-2-165; 58-2- 
171; 97-93. 



,0616 INSOLVENCY OR HAZARDOUS FINANCIAL 
CONDITION 

For the purposes of G.S. 58-2-145^). a group fund is 
unable to meet its obligations with respect to known claims 
and reasonably anticipated claims or to pay other obligations 
in the normal course of business when it has a negative 
group fund surplus. A negative group fund surplus is a 
financial position of a group fund in which the assets of a 
group fund are less than Its liabilities. A group fund that 
has a negative group fimd surplus is insolvent. In addition. 
the Commissioner shall consider a group fund to be in a 
hazardous financial condition if any of the standards or 
factors in G.S. 58-30-60(b) are applicable or present. 

Statutory Authority G.S. 58-2-40; 58-2-145; 58-30-60; 97- 
93; 97-136. 

.0617 GROUP ASSESSMENTS, DISCLOSURE, 
DEVUTIONS, AND DIVIDENDS 

(a) Each group shall file a plan for approval with the 
Commissioner to document its procedure for assessment of 
its members. The group shall provide the Commissioner 
with the assessment plan within 60 days after obtaining 
authority to self-insure. 

(b) The group's trustees or administrator shall notify the 
Commissioner no less than 60 days before an assessment. 

(c) The Commissioner shall impose assessments on group 
members if the trustees or administrator fails to take action 
to correct financial impairment or insolvency. 

(d) Every group through its trustees, administrator, 
servicing company, agents, or other representatives shall 
provide each member applicant, before approving the 
a pplication, with: 

(1) A document disclosing that the members of the 
group are jointly and severally liable for claims 
of the group. 

(2) A copy of the group's assessment plan that has 
been filed with and a pproved by the Commis- 
sioner under Paragraph (a) of this Rule. 

(3) The amount of specific and aggregate stop loss 
or excess insurance or reinsurance carried by the 
group, the amount and kind of risk retained by 
the group, and the name and rating of the in- 
surer providing the stop loss or excess insurance 
or reinsurance. 

(41 An o pportunity to receive a copy of or to inspect 
the policy described in Subparagraph (d)(3) of 
this Rule. 

(e) Proposed deviations shall be filed by a group with the 
Commissioner in writing at least 60 days before the begin- 
ning of the group's fund year. 

(f) Group dividends shall be declared in accordance with 
G.S. 58-8-25(b). 

(g) A group may continue to use all deviations and 
dividends filed and approved for its use until they have been 
disapproved by the Commissioner. 



10:16A 



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November 15, 1995 



1755 



PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-2-145; 58-8-35; 58-30- 
60; 58-36-30; 97-93; 97-136. 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to adopt rules cued as 11 NCAC IIF .0401 - .0405. 

Proposed Effective Date: February 1, 1997. 

A Public Hearing will be conducted at 10:00 a.m. on 
January 25, 1996 at the Dobbs Building, 3rd Floor Hearing 
Room, 430 N. Salisbury Street, Raleigh, NC 27611. 

Reason for Proposed Action: To be in compliance with 
NAIC standards. 

Comment Procedures: Written comments and questions 
should be directed to Walter James, 430 N. Salisbury Street, 
Raleigh, NC 27611, (919) 733-3284. Oral presentations 
may be made at the public hearing. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 11 - FINANCIAL EVALUATION 
DIVISION 

SUBCHAPTER IIF - ACTUARUL 

SECTION .0400 - COMMISSIONER'S RESERVE 
VALUATION METHOD 



after the effective date of this Section if the 
policy is issued in accordance with and as a 
result of the exercise of a reentry proyision 
contained in the original life insurance policy of 
the same or greater face amount, issued before 
the effective date of this Section, that guarantees 
the premium rates of the new policy: nor to 
subsequent policies issued as a result of the 
exercise of such a provision, or a derivation of 
the provision, in the new policy. 
(2} Any variable life insurance policy that provides 
for life insurance, the amount or duration of 
which varies according to the investment experi- 
ence of any separate account or accounts. 

(3) Any variable universal life insurance policy that 
provides for life insurance, the amount or dura- 
tion of which varies according to the investment 
experience of any separate account or accounts. 

(4) Group life insurance certificates unless the 
certificates provide for a stated or implied 
schedule of maximum gross premiums required 
in order to continue coverage in force for a 
period in excess of one year. 

(b) Calculation of the minimum valuation standard for 
policies with guaranteed nonlevel premiums or guaranteed 
nonlevel benefits (other than universal life policies), or both, 
shall be in accordance with U_ NCAC 1 IF. 0404. 

(c) Calculation of the minimum valuation standard for 
flexible premium and fixed premium universal life insurance 
policies that contain provisions resulting in the ability of a 
policyholder to keep a policy in force over a secondary 
guarantee period of more than five years shall be in accor- 
dance with 1 1 NCAC IIF .0405. 



.0401 APPLICABILITY 

(a) This Section does not apply to: 
(1) Any individual life insurance policy issued on or 



Statutory Authority G.S. 58-2-40; 58-58-50(d). 



.0402 DEFINITIONS 

As used in this Section: 

(1) "Basic reserves" means reserves calculated in accordance with the principles of G.S. 58-58-50(d). 

(2) "Contract segmentation method" means the method of dividing the period from issue to mandatory expiration of 
a policy into successive segments, with the length of each segment being defined as the period from the end of the 
prior segment (from policy inception, for the First segment) to the end of the latest policy year as determined 
below. All calculations are made using the 1980 CSO valuation tables, as defined in JJ. NCAC 1 IF .0402(5), (or 
any other valuation mortality table adopted by the NAIC after the effective date of this Section and adopted as a 
rule by the Commissioner for this purpose), and, if elected, the optional minimum mortality standard for deficiency 
reserves stipulated in 11 NCAC IIF .0403(b). 

TTie length of a particular contract segment shall be set equal to the minimum of the value t for which Gf is greater 
than R/ tif Gf never exceeds R/ the segment length is deemed to be the number of years from the beginning of the 
segment to the mandatory expiration date of the policy), where Gf and Rf are defined as follows: 



GP 



t+k+l 



Gf 



where: 



QS. x+k+t-l 



1756 



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November 15, 1995 10:16A 



PROPOSED RULES 



t 






X ^ original issue age: 

k ^ the number of years from the date of issue to the beginning of the segment: 

t ^ 1. 2. ■■■: t is reset to 1 at the beginning of each segment: 

2E x+k+t-i — Guaranteed gross premium per thousand of face amount, ignoring policy fees 

only if level for the premium paying period of the policy, for year t of the 
segment. 

a x+k+t 
Rf =^ 1 However. R/ may be increased or decreased by one percent in any policy year, 

3 x+k+t-i Si ^ company's option, but Rf shall not be less than one; 

where: 

jCi k and t are as defined above, and 
3 x+k+t-i .=. valuation mortality rate for deficiency reserves in policy year k+t. 

(3) "Deficiency reserves" means the excess, if greater than zero, of minimum reserves calculated in accordance with 
the principles of G.S. 58-58-50(g) over basic reserves. 

(4) "Maximum valuation interest rate" means the interest rate specified in G.S. 58-58-50(c')(4)b that is to be used in 
determining the minimum standard for the valuation of life insurance policies. 

(5} "1980 CSO valuation tables" means the Commissioners' 1980 Standard Ordinary Mortality Table (1980 CSO Table) 
without ten-year selection factors, incorporated into the 1980 amendments to the NAIC Standard Valuation Law, 
and variation of the 1980 CSO Table approved bj; the NAIC. such as the smoker and nonsmoker versions approved 
in December 1983. 

(6) "Scheduled gross premium" means the smallest illustrated gross premium at issue for other than universal life 
insurance policies. For universal life insurance policies, scheduled gross premium means the smallest specified 
premium described in U. NCAC IIF .0405(a)(3). if any, or else the minimum premium described in U. NCAC 
IIP .0405(a)(4). 

(7) "Segmented reserves" means reserves, calculated using segments produced by the contract segmentation method, 
equal to the present value of all future guaranteed benefits less the present value of all future net premiums to the 
mandatory expiration of a policy, where the net premiums within each segment are a uniform percentage of the 
respective gross premiums within the segment. 

(a) The uniform percentage for each segment is such that, at the beginning of the segment, the present value of the 
net premiums within the segment equals: 

(i) The present value of the death benefits within the segment, plus 
(ii) The present value of any unusual guaranteed cash value [see 11 NCAC UP .0404(d)1 occurring at the end of 

the segment, less 
(iii) Any unusual guaranteed cash value occurring at the start of the segment, plus 
(iv) Por the first segment only, the excess of the Item (i) over Item (ii), as follows: 

(A) A net level annual premium equal to the present values, at the date of issue, of the benefits provided for 
in the first segment after the first policy year, divided by the present value, at the date of issue, of an 
annuity of one per year payable on the first and each subsequent anniversary within the first segment on 
which a premium falls due. However, the net level annual premium shall not exceed the net level annual 
premium on the nineteen-year premium whole life plan of insurance of the same renewal year equivalent 
level amount at an age one year higher than the age at issue of the policy. 

(B) A net one year term premium for the benefits provided for in the first policy year. 

(b) The length of each segment is determined by the contract segmentation method. 

(c) The interest rates used in the present value calculations for any policy may not exceed the maximum valuation 
interest rate, determined with a guarantee duration equal to the sum of the lengths of all segments of the policy. 

(d) For both basic reserves and deficiency reserves computed by the segmented method, present values must include 
future benefits and net premiums in the current segment and in all subsequent segments. 

(8) "Tabular cost of insurance" means the net single premium at the beginning of a policy year for one-year term 
insurance in the amount of the guaranteed death benefit in that policy year. 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1757 



PROPOSED RULES 



(9) "Ten-year select mortality factors" means the select factors adopted with the 1980 amendments to the NAIC 

Standard Valuation Law. 

(10) "Unitary reserves" means the present value of all future guarantee benefits less the present value of all future 
modified net premiums, where: 

(a) Guaranteed benefits and modified net premiums are considered to the mandatory expiration of the policy: and 
(h) Modified net premiums are a uniform percentage of the respective guaranteed gross premiums, where the uniform 
percentage is such that, at issue, the present value of the net premiums equals the present value of all death 
benefits and pure endowments, plus the excess of Item (i) over Item (ii), as follows: 
ill A net level annual premium equal to the present value, at the date of issue, of the benefits provided for after 
the first poUcv year, divided by the present value, at the date of issue, of an annuity of one per year payable 
on the first and each subsequent anniversary of the policy on which a premium falls due. However, the net 
level annual premium shall not exceed the net level annual premium on the 19-vear premium whole life plan 
of insurance of the same renewal year equivalent level amount at an age one year higher than the age at issue 
of the policy. 
(ii) A net one year term premium for the benefits provided for in the first policy year, 
(c) The interest rates used in the present value calculations for any policy may not exceed the maximum valuation 
interest rate, determined with a guarantee duration equal to the length from issue to the mandatory expiration of 
the policy. 

(11) "Universal life insurance policy" means any individual life insurance policy under the provisions of which 
separately identified interest credits (other than in connection with dividend accumulations, premium deposit funds. 
or other supplementary accounts) and mortality or expense charges are made to the policy. 



Statutory Authority G.S. 58-2-40; 58-58-50(d). 

.0403 BASIC A>fD PRENOUM DEnCIENCY 
RESERVES 

(a) At the election of the company for any one or more 
specified plans of life insurance, the minimum mortality 
standard for basic reserves may be calculated using the 1980 
CSO valuation tables with select mortality factors (or any 
other valuation mortality table adopted by the NAIC after 
the effective date of this Section and adopted as a rule by 
the Commissioner for this purpose). If select mortality 
factors are elected, they may be: 

(1) The 10-year select mortality factors incorporated 
mto the 1980 amendments to the NAIC Standard 



Valuation Law. 



O) 



13] 



150 percent of the base select mortality factors 
of the NAIC Model Regulation entitled "Valua- 
tion of Life Insurance Policies Model Regula- 
tion"; or 

150 percent of the base select mortality factors 
of the NAIC Model Regulation entitled "Valua- 
tion of Life Insurance Policies Model Regula- 
tion" for the first 10 policy years; then linearly 
graded from the resulting tenth year factor to 
100 percent at policy year 16; or 
Any other table of select mortality factors 
adopted by the NAIC after the effective date of 
this Section and adopted as a rule by the Com- 
missioner for the purpose of calculating basic 
reserves, 
(b) Deficiencv reserves, if any, are calculated for each 
policy as the excess, if greater than zero, of the quantity A 
over the basic reserve. The quantity A is obtained by 
recalculating the basic reserve for the policy using guaran- 
teed gross premiums instead of net premiums when the 



£4) 



guaranteed gross premiums are less than the corresponding 
net premiums. At the election of the company for any one 
or more specified plans of insurance, the quantity A and the 
corresponding net premiums used in the determination of 
quantity A may be based upon the 1980 CSO valuation 
tables with select mortality factors (or any other valuation 
mortality table adopted by the NAIC after the effective date 
of this Section and adopted as a rule by the Commissioner). 
If select mortality factors are elected, they may be: 

(1) The 10-year select mortality factors incorporated 
into the 1980 amendments to die NAIC Standard 
Valuation Law. 

(2) 120 percent of the base select mortality factors 
of the NAIC Model Regulation entitled "Valua- 
tion of Life Insurance Policies Model Regula- 
tion"; 

(3) 120 percent of the base select mortality factors 
of the NAIC Model Regulation entitled "Valua- 
tion of Life Insurance Policies Model Regula- 
tion" for the first 10 policy years; then linearly 
graded from the resulting tenth year factor to 
100 percent at policy year 16; 

(4) Any other table of select mortality factors 
adopted b^ the NAIC after the effective date of 
this Section and adopted as a rule by the Com- 
missioner for the purpose of calculating defi- 
ciency reserves. 

(c) Notwithstanding Paragraphs (a) and (b) of this Rule, 
if the length of the first segment as determined by the 
contract segmentation method for the basic reserves is not 
greater than five years (safe harbor), then for the length of 
time measured from issue, for either the unitary method or 
the contract segmentation method, gross premiums need not 



1758 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



be substituted for net premiums even if the gross premiums 
are less than the net premiums. For subsequent periods, 
gross premiums must be substituted for net premiums if the 
gross premiums are less than the corresponding net premi- 
ums. 

(d) For any policies for which the company chooses to 
use the "safe harbor", the company shall demonstrate 
annually to die Commissioner, by submitting a statement of 
actuarial opinion signed by the appointed actuary, that the 
reserves held for all such polices are adequate. 

(e) In applying percentages to the base select mortality 
factors: 

(1) Do not round any result: and 

(2) Set equal to 100 any result that exceeds 100. 

(f) This subsection applies to both basic reserves and 
deficiency reserves. Any set of base select mortality factors 
may be used only for the first segment. However, if the 
first segment is less than 10 years, the appropriate 10-year 
select mortality factors may be used thereafter through the 
tenth policy year from the date of issue. 

(g) In determining basic reserves or deficiency reserves, 
gross premiums without policy fees may be used where the 
calculation involves the gross premium, but only if the 
p)olicy fee is a level dollar amount for the entire premium- 
paying period of the policy. In determining deficiency 
reserves, policy fees may be included in gross premiums 
even if they are not included in the actual calculation of 
basic reserves. 

Statutory Authority G.S. 58-2-40; 58-58-50(d). 

.0404 CALCULATION OF 11 NCAC 11 .0401(B) 

(a) Basic reserves shall be calculated as the greater of the 
segmented reserves and the unitary reserves. Both the 
segmented reserves and the unitary reserves for any policy 
must use the same valuation mortality table and selection 
factors. At the option of the insurer, in calculating 
segmented reserves and net premiums, either of the follow- 
ing adjustments may be made: 

(1) Treat the unitary reserve, if greater than zero, 
applicable at the end of each segment as a pure 
endowment; and subtract the unitary reserve, if 
greater than zero, applicable at the beginning of 
each segment from the present value of guaran- 
teed life insurance and endowment benefits for 
each segment. 

(2) Treat the guaranteed cash surrender value, if 
greater than zero, applicable at the end of each 
segment as a pure endowment: and subtract the 
guaranteed cash surrender value, if greater than 
zero, applicable at the beginning of each seg- 
ment from the present value of guaranteed life 
insurance and endowment benefits for each 
segment. 

(b) Deficiency Reserves. 

(1) The deficiency reserve at any duration shall be 
calculated: 



(A) On a unitary basis if the corresponding basic 
reserve determined by 11 NCAC 11 F .0404(a') 
is unitary: 

(B) On a segmented basis if the corresponding 
basic reserve determined by 11 NCAC IIF 
.0404(a) is segmented: or 

(C) On the segmented basis if the corresponding 
basic reserve determined by II NCAC 1 IF 
.0404(3) is equal to both the segmented reserve 
and the unitary reserve. 

(2) This subsection shall a pply to any policy for 
which the guaranteed gross premium at any 
duration is less than the corresponding modified 
net premium calculated by the method used in 
determining the basic reserves, but using the 
minimum valuation standards of mortality [speci- 
fied in 11 NCAC UF .0403(b')1 and rate of 
interest. 

(3) Deficiency reserves, if any, shall be calculated 
for each policy as the excess if greater than 
zero, for the current and all remaining periods. 
of the quantity A over the basic reserve, where 
A is obtained as indicated in jj. NCAC IIF 
.0403(b). 

(4) For deficiency reserves determined on a seg- 
mented basis, the quantity A is determined using 
segment lengths equal to those determined for 
segmented basic reserves. 

(c) Minimum Value Basic reserves may not be less than 
the tabular cost of insurance for the balance of the policy 
year, if mean reserves are used. Basic reserves may not be 
less than the tabular cost of insurance for the balance of the 
current modal period or to die paid-to-date. if later, but not 
beyond the next policy anniversary, if mid-terminal reserves 
are used. The tabular cost of insurance must use the same 
valuation mortalitv table, select mortality factor and interest 
rates as that used for the calculation of both the segmented 
and the unitary reserves. In no case may total reserves 
(including basic reserves, deficiency reserves and any 
reserves held for supplemental benefits that would expire 
uf)on contract termination) be less than the amount that the 
policyowner would receive (including the cash surrender 
value of the supplemental benefits, if any, referred to 
above), exclusive of any deduction for policy loans, upon 
termination of the policy. 

(d) Unusual Pattern of Guaranteed Cash Surrender 
Values. 

(1) For any policy with an unusual pattern of guar- 
anteed cash surrender values, the reserves 
actually held prior to the first unusual guarantee 
cash surrender value shall not be less than the 
reserves calculated by treating the first unusual 
guaranteed cash surrender value as a pure en- 
dowment and treating the policy as an « year 
policy providing term insurance plus a pure 
endowment equal to the unusual cash surrender 
value, where n is the number of years from the 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1759 



PROPOSED RULES 



date of issue to the date the unusual cash surren- 
der value is scheduled. 
(2) TTie reserves actually held subsequent to any 
unusual guaranteed cash surrender value shall 
not be less than the reserves calculated by 
treating the policy as an ^ year policy providing 
term insurance plus a pure endowment equal to 
the next unusual guaranteed cash surrender 
value, and treating any unusual guaranteed cash 
surrender value at the end of the prior segment 
as a net single premium, where: 

(A) n is the number of years from the date of the 
last unusual guaranteed cash surrender value 
prior to the valuation date to the earlier of: 

(i) The date of the next unusual guaranteed 
cash surrender value, if any, that is sched- 
uled after the valuation date; or 

(ii) TTie mandatory expiration date of the 
policy; and 

(B) The net premium for a given year during the 
n year period is equal to die product of the net 
to gross ratio and the respective gross pre- 
mium; and 

(C) The net to gross ratio is equal to Subpart 
(d)(2)(C)(i) divided by (ii) as follows: 

(i) The present value, at the beginning of the 
n year period, of death benefits payable 
during the n year period plus the present 
value, at the beginning of the n year pe- 
riod, of the next unusual guaranteed cash 
surrender value, if any, minus the amount 
of the last unusual guaranteed cash surren- 
der value, if any, scheduled at the begin- 
ning of the n year period, 
(ii) The present value, at the beginning of the 
n year period, of the scheduled gross 
premiums payable during the n year pe- 
riod. 
(3} For the purposes of 11 NCAC IIF .0404(d) a 
policy is considered to have an unusual pattern 
of guaranteed cash surrender values if any future 
guaranteed cash surrender value exceeds the 
prior year's guaranteed cash surrender value by 
more than the sum of: 

(A) 1 10 percent of the scheduled gross premium 
for that year; 

(B) 1 10 percent of one year's accrued interest on 
the sum of the prior year's guaranteed cash 
surrender value and the scheduled gross pre- 
mium using the nonforfeiture interest rate used 
for calculating policy guaranteed cash surren- 
der values; and 

(C) Five percent of the first policy year surrender 
charge, if any. 

(e) Optional Exemption for Yearly Renewable Term 
Reinsurance At the option of the company, the following 
approach for reserves on YRT reinsurance may be used: 



(1) Calculate the valuation net premium for each 
future policy year as the tabular cost of insur- 
ance for that future year. 

(2) Basic reserves shall never be less than the 
tabular cost of insurance for the appropriate 
period, as defined in 11 NCAC 11 F .0404(c). 

(3) Deficiency reserves. 

(A) For each policy year, calculate the excess, if 
greater than zero, of the valuation net premium 
over the respective maximum guaranteed gross 
premium. 

(B) Deficiency reserves shall never be less than the 
sum of the present values, at die date of valua- 
tion, of the excesses determined in accordance 
with Part (e)(3)(A) of this Rule. 

(4) For purposes of this section the calculations use 
the maximum valuation interest rate and the 
1980 CSO mortality tables with or without ten- 
year select mortality factors, or any other table 
adopted after the effective date of this Section by 
the NAIC and adpopted as a rule by the Com- 
missioner for this purpose. 

(5) A reinsurance agreement shall be considered 
YRT reinsurance for purposes of this subsection 

if: 

(A) The reinsurance premium rates (on both the 
initial current premium scale and the guaran- 
teed maximum premium scale) for any given 
year are independent of both the premium rates 
and the plan of the original policy; and 

(B) Only the mortality risk is reinsured. 

(fj Optional Exemption for Attained- Age-Based Yearly 
Renewable Term Life Insurance Policies At the option of 
the company, the following approach for reserves for 
attained-age-based YRT life insurance policies may be used: 

(1) Calculate the valuation net premium for each 
future policy year as the tabular cost of insur- 
ance for that future year. 

(2) Basic reserves shall never be less than the 
tabular cost of insurance for the appropriate 
period, as defined in 11 NCAC IIF .0404(c). 

(3) Deficiency reserves. 

(A) For each policy year, calculate the excess, if 
greater than zero, of the valuation net premium 
over the respective maximum guaranteed gross 
premium. 

(B) Deficiency reserves shall never be less than the 
sum of the present values, at the date of valua- 
tion, of the excesses determined in accordance 
with Part (f)(3)(A) of this Rule. 

(4) For purposes of this subsection, the calculations 
use the maximum valuation interest rate and the 
1980 CSO valuation tables with or without 10- 



year select mortality factors, or any other table 
adopted after the effective date of this Section by 
the NAIC and adopted as a rule by the Commis- 
sioner for this purpose. 



1760 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



^ 



(5) A policy shall be considered an attain ed-age- 
based YRT life insurance policy for purposes of 
this subsection if: 

(A) The premium rates (on both the initial current 
premium scale and the guaranteed maximum 
premium scale) are based upon the attained age 
of the insured such that the rate for any given 
policy at a given attained age of the insured is 
independent of the year the policy was issued: 
and 

(B) The premium rates (on both the initial current 
premium scale and the guaranteed maximum 
premium scale) are the same as the premium 
rates for policies covering all insureds of the 
same sex, risk class, plan of insurance and 
attained age. 

(6) For policies that become attained-age-based YRT 
policies after an initial period of coverage, the 
approach of this subsection may be used after 
the initial period i£^ 

(A) The initial period is constant for all insureds of 
the same sex, risk class and plan of insurance: 
or 

(B) The initial period runs to a common attained 
age for all insureds of the same sex, risk class 
and plan of insurance: and 

(C) After the initial period of coverage, the policy 
meets the conditions of Subparagraph (f)(5) of 
this Rule. 

(7) If this election is made, this approach must be 
applied in determining reserves for all attained- 
age-based YRT life insurance policies issued on 
or after the effective date of this Rule. 

(g) Exemption from Unitary Reserves for Certain At-Year 
Renewable Term Life Insurance Policies Unitary basic 
reserves and unitary deficiency reserves need not be 
calculated for a policy if the following conditions are met: 

(1) The policy consists of a series of w-year periods, 
including the first period and all renewal peri- 
ods, where n is the same for each period, and 
for each n-year period, the premium rates on 
both the initial current premium scale and the 
guaranteed maximum premium scale are level: 

(2) The guaranteed gross premiums in aU n-year 
periods are not less than the corresponding net 
premiums based upon the 1980 CSO Table with 
or without the lO-year select mortality factors; 
and 

(3) There are no cash surrender value in any policy 
year. 

(h) Exemption from Unitary Reserves for Certain Juvenile 
Policies Unitary basic reserves and unitary deficiency 
reserves need not be calculated for a policy if the following 
conditions are met, based upon the initial current premium 
scale at issue: 

(1) At issue, the insured is age 24 or younger: 

(2) Until the insured reaches the end of the juvenile 



period, which must occur at or before age 25. 
the gross premiums and death benefits are level, 
and there are no cash surrender values: and 
(3) After the end of the juvenile period, gross 
premiums are level for the remainder of the 
premium paying period, and death benefits are 
level for the remainder of the life of the policy. 

Statutory Authority G. S. 58-2-40; 58-58-50(d). 

.0405 CALCULATION OF 11 NCAC 11 .0401(C) 

(a) General. 

(1) Policies with a secondary guarantee include: 

(A) A policy with a guarantee that the policy will 
remain in force at the original schedule of 
benefits over a period exceeding five years, 
subject only to die payment of specified premi- 
ums: 

(B) A policy in which the minimum premium at 
any future duration beyond the end of the fifth 
policy year is less than the corresponding one 
year valuation premium, calculated using the 
maximum valuation interest rate and the 1980 
CSO valuation tables with or without ten-year 
select mortality factors, or any other table 
adopted after the effective date of this Rule by 
the NAIC and promulgated by regulation by 
the Commissioner for this purpose; or 

(C) A policy with any combination of Parts 
(a)(1)(A) and (B) of this Rule. 

(2) A secondary guarantee period is the longest 
period for which the policy is guaranteed to 
remain in force subject only to a secondary 
guarantee. Secondary guarantees that are unilat- 
erally extended by die insurer after issue shall be 
considered to have been made at issue. Re- 
serves described in Paragraphs (h) and (c) of 
this Rule shall recalculated from issue to reflect 
the extensions. 

(3) Specified premiums mean the premiums speci- 
fied in the policy, the payment of which guaran- 
tees that the policy will remain in force at the 
original schedule of benefits, but which other- 
wise would be insufficient to keep the policy in 
force in the absence of the guarantee if maxi- 
mum mortality and expense charges and mini- 
mum interest credits were made and any applica- 
ble surrender charges were assessed. 

(4) For purposes of this Rule, the minimum pre- 
mium for any policy year is the premium that, 
when paid into a policy with a zero account 
value at the beginning of the policy year, pro- 
duces a zero account value at the end of the 
policy year. The minimum premium calculation 
must use the policy cost factors (including 
mortality charges, loads and expense charges) 
and the interest crediting rate, which are all 



10:16A 



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November 15, 1995 



1761 



PROPOSED RULES 



guaranteed at issue. 
(5) The one-year valuation premium means the net 
one-year premium based upon the original 
schedule of benefits for a given policy year. 
TTie one-year valuation premiums for all policy 
years are calculated at issue. The select mortal- 
ity factors defined in 11 NCAC IIF .(MOSfalfl). 
.0403(a)(3). .0403(a)(4). .0403(b)(2). 

.0403(b)(3). and .0403(b)(4) may not be used to 
calculate the one-year valuation premiums. 

(b) Basic reserves for the secondary guarantees shall be 
the segmented reserves for the secondary guarantee period. 
In calculating the segments and the segmented reserves, the 
gross premiums shall be set equal to the specified premi- 
ums, if any, or otherwise to the minimum premiums, that 
keep the policy in force and the segments will be determined 
according to the contract segmentation method as defined in 
11 NCAC IIF .0402(2). 

(c) Deficiency reserves, if any, for the secondary guaran- 
tees shall be calculated for the secondary guarantee period 
in the same manner as described in \\_ NCAC 1 IF .0404rb) 
with gross premiums set equal to the specified premiums, if 
any, or otherwise to the minimum premiums that keep the 
policy in force. 

(d) The minimum reserves during the secondary guaran- 
tee period are the greater of: 

(1) TTie basic reserves for the secondary guarantee 
plus the deficiency reserve, if any, for the 
secondary guarantees; or 

(2) TTie minimum reserves required by other rules 
or regulations governing universal life plans. 

Statutory Authority G.S. 58-2-40; 58-58-50(d). 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to amend rule cited as 11 NCAC 12 .0514. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 10:00 a.m. on 
December 6, 1995 at the Dobbs Building, 3rd Floor Hearing 
Room, 430 N. Salisbury Street, Raleigh, NC 27611. 

Reason for Proposed Action: Necessary to make technical 
changes and clarifications in the rule. 

Comment Procedures: Written comments and questions 
should be directed to Rodney Finger, 430 N. Salisbury 
Street, Raleigh, NC 27611, (919) 733-5060. Oral presenta- 
tions may be made at the public hearing. 

Fiscal Note: This Rule does not affect the expenditures or 
revenues of state or local government funds. 



CHAPTER 12 - LIFE AND HEALTH DIVISION 

SECTION .0500 - ACCIDENT AND HEALTH: 
GENERAL NATURE 

.0514 COORDINATION: GROUP A/H CONTRACT 
BENEFITS: GROUP COVERAGES 

Purpose. In order to promote consistency in liability for 
claims and claims determination for Group Accident and 
Health coverage, the department shall require a uniform 
order of benefits determination as follows: 

(1) Applicability: 

(a) This Coordination of Benefits ("COB") provision 
applies to this plan when a employee or the 
employee's covered dependent has health care 
coverage under more than one plan. "Plan" and 
"This Plan" are defined in Sub-items (2)(a) and 
O) of this Rule. 

(b) If this COB provision applies, the order of 
benefit determination rules should be looked at 
first. Those rules determine whether the bene- 
fits of this plan are determined before or after 
those of another plan. The benefits of this plan: 

(i) Shall not be reduced when, under the order of 
benefit determination rules, this plan deter- 
mines its benefits before another plan; but 
(ii) May be reduced when, under the order of 
benefit determination rules, another plan 
d e torminos its Soction — (IV) Effect on tho 
B e n e fits of thio plan, is required to determine 
its benefits first. 

(2) Defmitions: 

(a) A "Plan" is any of these which provides benefits 
or services for, or because of, medical or dental 
care or treatment: 

(i) True group insurance. This includes prepay- 
ment, group practice or individual practice 
coverage. It does not include school acci- 
dent-type coverage, blanket, franchise individ- 
ual, automobile and homeowner coverage, 
(ii) Coverage under a governmental plan or re- 
quired or provided by law. Tliis does not 
include a state plan under Medicaid (Title 
XIX, Grants to States for Medical Assistance 
Programs, of the United States Social Security 
Act as amended from time to time). It also 
does not include any plan when, by law, its 
benefits are excess to those of any private 
insurance program or other non-governmental 
program. 
Each contract or other arrangement for coverage 
under Sub-item (2)(a)(i) or (ii) is a separate plan. 
Also, if an arrangement has two parts and COB 
rules apply only to one of the two, each of the 
parts is a separate plan. 

(b) "This Plan" is the part of the group contact that 
provides benefits for health care expenses. 



1762 



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November 15, 1995 10:16A 



PROPOSED RULES 



> 



(c) "Primaiy Plan"/"Secondaiy Plan". The order of 
benefit determination rules state whether this 
plan is a Primary Plan or Secondary Plan as to 
another plan covering the person. When this 
plan is a Primary Plan, its benefits are deter- 
mined before those of the other plan and without 
considering the other plan's benefits. When 
there are more than two plans covering the 
person, this plan may be a Primary Plan as to 
one or more other plans, and may be a Second- 
ary Plan as to a different plan or plans. 

(d) "Allowable Expense" means a necessary, rea- 
sonable, and customary item of expense for 
health care, when the item of exfjense is covered 
at least in part by one or more plans covering 
the person for whom the claim is made. When 
a plan provides benefits in the form of services, 
the reasonable cash value of each service ren- 
dered will be considered both an allowable 
expense and a benefit paid. Total benefits paid 
must be equal to 100 percent of necessary 
medical expenses covered by both plans. 

(e) "Claim Determination Period" means a calendar 
year. However, it does not include any part of 
a year during which a person has no coverage 
under this plan, or any part of a year before the 
date this COB provision or a similar provision 
takes effect. 

(3) Order of Benefit Determination Rules: 

(a) General. When there is a basis for a claim 
under this plan and another plan, this plan is a 
Secondary Plan which has its benefits deter- 
mined after those of the other plan, unless: 

(1) the other plan has rules coordinating its bene- 
fits with those of this plan; and 
(ii) both those rules and this plan's rules, in 
Sub-item (3)(b) (ii)(B) of this Rule, require 
that this plan's benefits be determined before 
those of the other Plan. 

(b) Rules. This plan determines its order of benefits 
using the first of the following rules which 
applies: 

(i) Non-dependent/Dependent. The benefits of 
the plan which covers the person as an em- 
ployee, member or subscriber (that is, other 
than as a dependent) are determined before 
those of the plan which covers the person as a 
dependent, dependent: except that: if the 
person is also a Medicare beneficiary, and as 
a result of the rule established by Title VXIII 
of the Social Security Act and implementing 
regulations. Medicare is: 

(A) Secondary to the plan covering the person 
as a dependent: and 

(B) Primary to the plan covering the person as 
other than a dependent (e.g. a retired 
employee), then the benefits of the plan 



covering the person as a dependent are 
determined before those of the plan cover- 
ing that person as other than a dependent. 
(ii) Dependent Child/Parents Not Separated or 
Divorced. Except as stated in Sub-item 
(3)(b)(iii)(B) of this Rule, when this plan and 
another plan cover the same child as a depend- 
ent of different persons, called "parents": 

(A) the benefits of the plan of the parent 
whose birthday falls earlier in a year are 
determined before those of the plan of the 
parent whose birthday falls later in that 
year; but 

(B) if both parents have the same birthday, the 
benefits of the plan that has covered a 
parent for a longer period of time are 
determined before those of the plan that 
covered the other parent for a shorter 
period of time. 

As used in this Sub-item, "birthday" refers 
otJv to month and day in a calendar year not 
the year in which the person is bom. 
However, if the other plan does not have the rule 
described in Paragraph (3) (a) Sub-item 3(b)(ii) in 
this Rule, but instead has a rule based upon the 
gender of the parent, and if, as a result, the plans 
do not agree on the order of benefits, the rule in 
the other plan will determine the order of benefits, 
(iii) Dependent Child/Separated or Divorced Par- 
ents. If two or more plans cover a person as 
a dependent child of divorced or separated 
parents, benefits for the child are determined 
in this order: 

(A) first, the plan of the parent with custody of 
the child; 

(B) then, the plan of the spouse of the parent 
with custody of the child; and 

(C) finally, the plan of the parent not having 
custody of the child. 

However, if the specific terms of a court decree 

state that one of the parents is responsible for the 

health pay or provide the benefits of the plan of 

that parent has actual knowledge of those terms, 

the benefits of that plan are determined first. In 

this Rule, Sub-item (3)(b)(iii)(C) does not apply 

with respect to any claim determination period or 

plan year during which any benefits are actually 

paid or provided before the entity has that actual 

knowledge. 

(iv) Activ e Inactiv e Employ ee . — The bonefito of a 

plan whioh cov e rs a p e rson oo an e mploy ee 

who is neither laid off nor retired (or aa that 

omployoo'fl dependent) are dotorminod before 

thoDo of a plan whioh oov e rs that p e rson as a 

laid off or r e tir e d e mploy ee (or as that e m 

ployoo's dopondont). If the other plan does not 

have (3)(b)(iv), and if, as a result, the plans do 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1763 



PROPOSED RULES 



not agroo on tho order of benefits. (3)fb)(iv) is 
ignor e d. Active/Inactive Employee. The 
benefits of a plan which covers a person as an 
employee who is nether laid off nor retired are 
determined before those of a plan which cov- 
ers that person as laid off or retired employee. 
The same would hold true if a person is a 
dependent of a pierson covered as a retiree and 
an employee. If the other plan does not have 
this rule, and iL. as S result, the plans do not 
agree on the order of benefits, this rule is 
ignored. 

(v) Joint Custody. If the specific terms of a court 
decree state that the parents shall share joint 
custody, without stating that one of the parents 
is responsible for the health care expenses of 
the child, the plans covering the child shall 
follow the order of benefit determination rules 
outlined in Sub-item (3)('b)(ii) of this Rule. 

(vi) Continuation coverage. If a person whose 
coverage is provided under a right of continua- 
tion pursuant to federal or state law also is 
covered under another plan, the follouing shall 
be the order of benefit determination: 

(A) First, the benefits of a plan covering the 
person as an employee, member or sub- 
scriber (or as that person's dependent); 

(B) Second, the benefits under the continuation 
coverage. If the other plan does not have 
the rules described aboye, and if, as a 
result, the plans do not agree on the order 
of benefits, this Rule is ignored. 

(v) (vii) Longer/Shorter Length of Coverage, tl 
more of Paragraph (3) of this Rul e If none of 
the above rules determine determine s the order 
of benefits, the benefits of the plan which 
covered an employee, member or subscriber 
longer are determined before those of the plan 
which covered that f)erson for the shorter time. 



Hearing Room, 430 N. Salisbury Street, Raleigh, NC 
27611. 

Reason for Proposed Action: 

11 NCAC 12 .0307, .0326 - Changes procedures for filing 
and for making application for insurance coverage. 
11 NCAC 12 .0415, .0416, .0436, .0449 - Changes proce- 
dures for making application for insurance coverages and to 
change requirements for variable life insurance policies. 
11 NCAC 12 .0460, .0552 - Current legislation made rules 
unnecessary. 

11 NCAC 12 .0562 - Provides for return of unearned 
premiums in health insurance. 

11 NCAC 12 .0822, .0824, .0825, .0835, .0837, .0839 - 
Required by Federal law. 

11 NCAC 12 .1004 - Change made necessary by Federal 
law. 

11 NCAC 12 .1601 - .1604 - Establish guidelines for 
payments of death benefits under insurance policies. 
11 NCAC 12 .1701 - .1709 - Necessary to comply with 
recent statute changes made by the last session of the 
General Assembly. 

11 NCAC 17 .0006 - Change made necessary by recent 
legislation. 

Comment Procedures: Chapter 12 - Written comments and 
questions should be directed to Rodney Finger, 430 N. 
Salisbury Street, Raleigh, NC 27611. (919) 733-5060. Oral 
presentations may be made at the public hearing. 
Chapter 17 - Written comments and questions should be 
directed to Carlo Suitt, Seniors Health Insurance Informa- 
tion Program, NC Department of Insurance, 112 Cox 
Avenue, Raleigh, NC 27605, (919) 733-0111. Oral presen- 
tations may be made at the public hearing. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of state or local government funds. 

CHAPTER 12 - LIFE AND HEALTH DIVISION 



Statutory Authority G.S. 58-2-40; 58-51-1; 58-65-1; 58-65- 
40; 58-67-1. 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to amend rules cited as 11 NCAC 12 .0307, .0326, 
.0415 - .0416. .0436, .0449, .0822, .0824 - .0825, .0835, 
.0837, .1004; 17 .0006; repeal rules cited as 11 NCAC 12 
.0460, .0552 and adopt rules cited as 1 1 NCAC 12 .0562, 
.0839, .1601 - .7604, .1701- .1709. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 10:00 am on 
December 6. 1995 at the Dobbs Building, Third Floor 



SECTION .0300 - GENERAL PROVISIONS 

.0307 FILCVG APPROVAL: LIFE: ACCIDENT AND 
HEALTH FORMS 

(a) The following procedure shall be used in filing life, 
annuity, and accident and health and health maintenance 
organization forms for approval by the Department: 

(1) A filing letter shall be submitted in duplicate 
with the Federal Employee Identification Num- 
ber (FEIN); forms shall be Usted by number and 
descriptive title; the filer shall indicate if the 
form is new and briefly describe the use of the 
form; if the form is a revision the filer shall 
identify' the form being replaced by its number 
and approval date; 

(2) If riders, endorsements or certificates are filed 
separately, the filer shall indicate policy forms 



1764 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



(3) 



(4) 



(5) 



(6) 



(7) 



(A) 
(B) 



(8) 



(9) 



(10) 



with which they are used; 
Only ono oopy of th e form Dhall b e oubmitt e d 
unlooo th e fil e r d e oiroo a otamp e d oopy; Forms 
shall be submitted in duplicate and each form 
shall be identified by a form number in the 
lower left-hand comer of the first page. Forms 
filed for Medicare supplement insurance shall be 
filed in triplicate. For the purposes of approval 
all forms shall be in final print. The Commis- 
sioner shall not accept photocopies as final print. 
All forms shall be completed with specimen 
data; 

Rates by age and mode of payment including the 
actuarial memorandum shall be attached to each 
form requiring a premium; 
The filer shall submit evidence of approval of 
the subject identical filing by the filer's state of 
domicile; 

The filer shall submit a listing of states in which 
any subject identical filing has been submitted 
and a listing of states that have: 
approved; or 

disapproved, including the reasons for disap- 
proval; 
The filer shall submit copies of any endorse- 
ments, riders or changes in the subject filing 
required by any other jurisdiction as a condition 
of approval; 

Subparagraphs (6), (7), and (8) of this Paragraph 
shall not be applicable to domestic insurers; 
The filer shall submit copies of sales promotion 
material to be used in North Carolina for onnu 
ities — aad — interest sonsitivo — life — products. 



58-65-1; 58-65-40; 58-67-50; 58-67-150; 58-54-35; 58-55- 
30. 

.0326 APPLICATION FOR INSURANCE REQUIRED 

(a) Apphcations for individual Ufe, and accident or health 
insurance and annuities intended to insure North Carolina 
residents shall, except in the case of direct response busi- 
ness, be signed by a North Carolina licensed agent. The 
signature of the licensed agent must be his or her actual 
signature. 

(b) Applications for insurance shall not include questions 
related to membership in substance or chemical dependency 
support groups. The applicant may be required to complete 
any medical question related to actual treatment, confine- 
ment, or diagnosis of such conditions. 

Statutory Authority G.S. 58-2-40; 58-33-25 (o)(5); 58-50-5. 

SECTION .0400 - LITE: GENERAL NATURE 

.0415 LIFE APPLICATION 

All Ufe and annuity apphcations used to soUcit life insurance 
or annuities in North Carolina must shall inquire whether or 
not the replacement of existing life insurance or annuities is 
involved in the transaction. 

Statutory Authority G.S. 58-2-40(1); 58-3-150; 58-33-75; 
58-58-1. 

.0416 LIFE APPLICATION: GUARANTEED ISSUE 

When a life insurance policy or certificate is sold on a 
guaranteed issue basis, the application for such life insur- 
ance used in the soUcitation may not contain health questions 
or statements regarding an applicant's health of the appli 



annuities, interest-sensitive life. Medicare supple- 
ment, and long-term care products. All such 
advertisements shall be identified by a unique 
form number in die lower left-hand comer of the Statutory Authority G.S. 58-2-40(1); 58-3-150; 58-58-1. 



first page. 

(b) Individual accident and health premium rate revisions 
for which Department approval is required by General 
Statute Chapter 58 must be filed in triplicate and include 
evidence of the Department's approval of that policy's most 
recent rate revision. 

(c) Remittance of the filing fee shall be made within 45 
days after the date of the filing fee notice or the file will be 
closed. 

(d) If the status of a pending rate or form filing is 
desired, a written request for such status must be made by 
the filer no earlier than 60 days after the date of the filing 
letter. 

(e) A written notice must be given to the Department by 
the filer before forms or rates are deemed by statute to be 
approved. 

(f) If the filer does not respond to a forms filing disap- 
proval letter within 90 days of disapproval the file is closed. 

Statutory Authority G.S. 58-2-40; 58-6-5; 58-51-1; 58-58-1; 



.0436 INSURANCE POLICY REQUIREMENTS 

The oommissionor Commissioner shall not approve any 

variable Ufe insurance form filed pursuant to this Regulation 

Rule unless it conforms to the requirements of this Section: 

(1) Filing of Variable Life Insurance Policies. All 

variable life insurance policies, and all riders, 

endorsements, applications and other documents 

which are to be attached to and made a part of the 

policy and which relate to the variable nature of 

the policy, shall be filed with the commissioner 

and approved by him in writing prior to delivery 

or issuance for delivery in this state: 

(a) The procedures and requirements for such filing 
and approval shall be, to the extent appropriate 
and not inconsistent with this Regulation, the 
same as those otherwise applicable to other life 
insurance policies. 

(b) The commissioner may approve variable life 
insurance [xjlicies and related forms with provi- 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1765 



PROPOSED RULES 



sions the commissioner deems to be not less 
favorable to the policyholder and the beneficiary 
than those required by this Regulation. 

(c) The requirements of (3)(e) of this Rule shall not 

apply to variable life insurance policies and 
related forms issued in connection with pension, 
profit-sharing and retirement plans if separate 
accounts for such policies are exempt pursuant 
to Section 3(c)(l 1) of the Investment Company 
Act of 1940. 
(2) Mandatory Policy Benefit and Design Require- 

ments. Variable life insurance policies delivered 
or issued for delivery in this state shall comply 
with the following minimum requirements: 

(a) The mortality and expense risk shall be borne by 
the insurer. 

fb) Gross premiums for death benefits shall be a 
level amount for the duration of the premium 
payment period, but this Subsection shall not be 
construed to prohibit temporary or permanent 
additional premiums for incidental insurance 
benefits or substandard risks. TTiis Subsection 
shall not be deemed to prohibit the use of fixed 
benefit preliminary term insurance for a period 
not to exceed 120 days from the date of the 
application for a variable life insurance policy. 
The premium rate for such preliminary term 
insurance shall be stated separately in the appli- 
cation or receipt. 

(c) A minimum death benefit shall be provided in an 
amount at least equal to the initial face amount 
of the policy so long as premiums are duly paid 
[subject to the provisions of (4)(b) of this Rule]. 

(d) The policy shall provide that the variable death 
benefit shall reflect the investment experience of 
the variable life insurance separate account 
established and maintained by the insurer and 
that the excess, positive or negative, of the net 
investment return over the assumed investment 
rate, as applied to the benefit base of each 
variable life insurance policy, shall be used to 
provide: 

(i) fully paid-up variable life insurance providing 
coverage for the same period as the basic 
insurance under the policy or fully paid-up 
term insurance amounts for a term of annual 
periods of not less than one year nor more 
than five years, positive or negative, as the 
case may be, or a combination thereof; or 

(ii) variable life insurance amounts, positive or 
negative, as the case may be, so that the 
reserve maintains the same percentage relation- 
ship to the variable death benefit as it would 
have on a corresponding fixed benefit policy: 
or 

(iii) any other form of insurance benefits as the 
commissioner may approve. 



(e) Each variable life insurance policy shall be 
credited with the fiill amount of the net invest- 
ment return applied to the benefit base. 

(f) Changes in variable death benefits of each 
variable Ufe insurance policy shall be determined 
at least annually. 

(g) Tlie cash value of each variable life insurance 
policy shall be determined at least monthly. The 
method of computation of cash values and other 
non-forfeiture benefits, as described either in the 
policy or in a statement filed with the commis- 
sioner of the state in which the policy is deliv- 
ered, or issued for delivery, shall be in accor- 
dance with actuarial procedures that recognize 
the variable nature of the policy. The method of 
computation must be such that, if the net invest- 
ment return credited to the policy at all times 
from the date of issue should be equal to the 
assumed investment rate with premiums and 
benefits determined accordingly under the terms 
of the policy, then the resulting cash values and 
other non-forfeiture benefits must be at least 
equal to the minimum values required by G.S. 
58-201.2 of the insurance laws of this state 
(Standard Non-forfeiture Law) for a fixed bene- 
fit poUcy with such premiums and benefits. The 
assumed investment rate shall not exceed the 
maximum interest rate permitted under the 
Standard Non-forfeiture Law of this state. The 
method of computation may disregard incidental 
minimum guarantees as to the dollar amounts 
payable. Incidental minimum guarantees in- 
clude, for example, but are not to be limited to, 
a guarantee that the amount payable at death or 
maturity shall be at least equal to the amount 
that otherwise would have been payable if the 
net investment return credited to the policy at all 
times from the date of issue had been equal to 
the assumed investment rate. 

(h) The computation of values required for each 

variable life insurance policy may be based upon 

such reasonable and necessary approximations as 

are acceptable to the commissioner. 

(i) In determining the net investment return to be 

applied to the benefit base the insurer may 

deduct only the charges described in 

.0438(7)(aKi), (ii), (iv), and (v) of this Section. 

(3) Mandatory Policy Provisions. Every variable life 

insurance policy filed for approval in this state 

shall contain at least the following: 

(a) TTie cover page or pages corresponding to the 

cover page of each such policy shall contain: 

(i) a prominent statement in either contrasting 

color or in boldface type at least four points 

larger than the type size of the largest type 

used in the text of any provision of that page, 

that the death benefit may be variable for fixed 



1766 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



► 



under specified conditions; 

(ii) a prominent statement in either contrasting 
color or in boldface type at least four points 
larger than the type size of the largest type 
size used in the text of any provision on that 
page that cash values may increase or decrease 
in accordance with the experience of the 
separate account subject to any specified 
minimum guarantees; 

(iii) a statement that the minimum death benefit 
will be at least equal to the initial face amount 
at the date of issue if premiums are duly paid 
and if there are no outstanding policy loans, 
partial withdrawals, or partial surrenders; 

(iv) the rule, or a reference to the policy provision 
which describes the method for determining 
the variable amount of insurance payable at 
death; 

(v) a captioned provision which provides that the 
policyholder may return the variable life 
insurance policy within 45 days of the date of 
the execution of the application or within 10 
days of receipt of the policy by the policy- 
holder, whichever is later, and receive a 
refund of all premium payments for such 
policy; and 

(vi) such other items as are currently required for 
fixed benefit Ufe insurance policies and which 
are not inconsistent with this Regulation; 
(vii) for all variable life insurance policies, which 
do not provide, while in force, a death benefit 
at least equal to the amount specified at issue 
or at the most recent policy change requested 
by the [xslicyholder, must contain an endorse- 
ment or sticker, printed in contrasting type or 
color which contains sufficient cautionary 
languages such as: "THIS POLICY DOES 
NOT HAVE A MINIMUM GUARANTEED 
DEATH BENEFIT. THE DEATH BENEHT 
IN THIS POUCY MAY BE LESS THAN OR 
MAY EXCEED THE PROJECTED BENE- 
FITS REPRESENTED BY THE SOUCITING 
AGENT. " 

(b) A provision for a grace period of not less than 
31 days from the premium due date which shall 
provide that where the premium is paid within 
the grace period, policy values will be the same, 
except for the deduction of any overdue pre- 
mium, as if the premium were paid on or before 
the due date; 

(c) A provision that the policy will be reinstated at 
any time within two years from the date of 
default upon the written application of the in- 
sured and evidence of insurability, including 
good health, satisfactory to the insurer, unless 
the cash surrender value has been paid or the 
period of extended insurance has expired, upon 



the payment of any outstanding indebtedness 
arising subsequent to the end of the grace period 
following the date of default together with 
accrued interest thereon to the date of reinstate- 
ment and payment of an amount not exceeding 
the greater of: 
(i) all overdue premiums with Interest at a rate 
not exceeding eight percent per annum com- 
pounded annually and any indebtedness in 
effect at the end of the grace period following 
the date of default with interest at a rate not 
exceeding eight percent per annum com- 
pounded annually; or 
(ii) 1 10 percent of the increase in cash surrender 
value resulting from reinstatement plus all 
overdue premiums for incidental insurance 
benefits with interest at a rate not exceeding 
eight percent per annum compounded annually; 

(d) A full description of the benefit base and of the 
method of calculation and application of any 
factors used to adjust variable benefits under the 
policy; 

(e) A provision designating the separate account to 
be used and stating that: 

(i) Such separate account shall be used to fund 
only variable life Insurance benefits, except to 
the extent permitted by (5)(c)(vi) of this Rule; 

(ii) The assets of such separate account shall be 
available to cover the liabilities of the general 
account of the insurer only to the extent that 
the assets of the separate account exceed the 
habillties of the separate account arising under 
the variable life insurance policies supported 
by the separate account; and 

(ill) The assets of such separate account shall be 
valued at least as often as any policy benefits 
vary but at least monthly; 

(f) A provision that at any time during the first +8 
24 months of the variable life insurance policy, 
so long as premiums are duly paid, the owner 
may exchange the policy for policy, or any 
requested increase in face amount, for a life 
insurance policy providing benefits that do not 
vary with the investment experience of a vari- 
able account. The owner shall be given the 
option to exchange the variable life insurance 
policy for: a policy of permanent fixed benefit 
fixed premium life insurance, or inauronco on 
tho life of the inaurod for the same initial 
amount of inourono e as th e variabl e lif e inour 
ano e polioy, and on a plan of inourano e op e cifi e d 
in tho policy, provided that tho now policy: a 
policy of flexible benefit flexible premium life 
insurance. The new policy shall be on a plan of 
insurance specified in the policy, provided that 
the new policy: 

(i) shall bear the same date of issue and age at 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1767 



PROPOSED RULES 



issue as the original variable life insurance (i) 

policy; 
(ii) is issued on a substantially comparable plan of 
pormanont life insurance offered in this state 
by the insurer or an affiliate on the date of (ii) 

issue of the variable life insurance policy and 
at the premium rates in effect on that date for 
the same class of insurance; 
(iii) includes such riders and incidental insurance 
benefits as were included in the original policy 
if such riders and incidental insurance benefits (p) 

are issued with fixod benefit the new policy; 
(iv) shall be issued subject to an equitable premium 
or cash value adjustment that takes appropriate 
account of the premiums and cash values under (i) 

the original and new policies; A detailed 
statement of the method of computing such 
adjustment shall be filed with the commis- 
sioner; 
(v) shall not require evidence of insurability for (ii) 

this exchange; 
(g) A provision that the policy and any papers 
attached hereto by the insurer, including the 
application if attached, constitute the entire 
insurance contract; 
(h) A designation of the officers of the insurer who 
are empowered to make an agreement or repre- 
sentation on behalf of the insurer and an indica- 
tion that statements by the insured, or on his 
behalf, shall be considered as representation and 
not warranties; 
(i) An identification of the owner of the insurance 

contract; (q) 

(j) A provision setting forth conditions or require- 
ments as to the designation, or change of desig- (r) 
nation, of a beneficiary and a provision for 
disbursement of benefits in the absence of a (s) 
beneficiary designation; 
(k) A statement of any conditions or requirements 

concerning the assignment of the policy; (4) 

(1) A description of any adjustment in policy values 

to be made in the event of misstatement of age 
or sex of the insured; 
(m) A provision that the policy shall be incontestable 

by the insurer after it has been in force for two 
years during the life time of the insured; (a) 

(n) A provision stating that the investment policy of 
the separate account shall not be changed with- 
out the approval of the insurance commissioner 
of the state of domicile of the insurer, and that (i) 

the approval process is on file with the commis- 
sioner of this state; (ii) 
(o) A provision that payment of variable death 

benefits in excess of the minimum death bene- (iii) 

fits, cash values, policy loans, or partial with- 
drawals (except when used to pay premiums) or 
partial surrenders may be deferred: 



for up to six months from the date of request, 
if such payments are based on policy values 
which do not dejjend on the investment perfor- 
mance of the separate account; or 
otherwise, for any period during which the 
New York Stock Exchange is closed for trad- 
ing (except for normal holiday closing) or 
when the Securities and Exchange Commission 
has determined that a state of emergency exists 
which may make such payment impractical; 
A description of the basis for computing the 
cash surrender value under the policy shall be 
included; Such surrender value may be ex- 
pressed as either: 
a schedule of cash value amounts per one 
thousand dollars ($1,000) of variable face 
amount at each attained age or policy year for 
at least 20 years from issue, or for the pre- 
mium paying period, if less than 20 years; or 
one cash value schedule as described in 
(3)(p)(i) of this Rule for the death benefit, or 
for each one thousand dollars ($1,000) of 
death benefit, which would be in effect if the 
net investment return is always equal to the 
assumed investment rate and a second schedule 
applicable to any adjustments to the death 
benefit (disregarding the minimum death 
benefit guarantee and term insurance amounts) 
if the net investment return does not equal the 
assumed investment rate at each age for at 
least 20 years from issue, or for the premium 
paying period if it is less than 20 years; 
Premiums for incidental insurance benefits shall 
be stated separately; 

Any other policy provisions required by this 
Regulation; 

Such other items as are currently required for 
fixed benefit life insurance policies and are not 
inconsistent with this Regulation. 
Non-forfeiture, Partial Withdrawal, Policy Loan 
and Partial Surrender Provisions. Every variable 
life insurance policy delivered or issued for 
delivery in this state shall contain provisions 
which are not less favorable to the policyholders 
than the following: 
a provision for non-forfeiture insurance benefits 
so that at least one such benefit is offered on a 
fixed basis from the due date of the premium in 
default: 
Variable extended term insurance may not be 
offered; 

A given non-forfeiture option need not be 
offered on both a fixed and a variable basis; 
The insurer may establish a reasonable mini- 
mum cash surrender value below which any 
such non-forfeiture insurance options will not 
be available; 



1768 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



) 



(b) a provision for policy loans (which may at the 
option of the insurer be entitled and referred to 
as a partial withdrawal provision) not less favor- 
able to the policyholder than the following: 
(i) Up to 75 percent but if the loan is made from 
the general account not more than 90 percent 
of the policy's cash value may be borrowed; 

(ii) The amount borrowed, or any repayment 
thereof, shall not affect the amount of the 
premium payable under the policy; 

(iii) The amount borrowed shall bear interest at a 
rate not to exceed eight percent per year 
compounded annually; 

(iv) Any indebtedness shall be deducted from the 
proceeds payable on death; 

(v) Any indebtedness shall be deducted from the 
cash value upon surrender or in determining 
any non-forfeiture benefit; 

(vi) Whenever the indebtedness exceeds the cash 
value, the insurer shall give notice of intent to 
cancel the policy if the excess indebtedness is 
not repaid within 31 days after the date of 
mailing of such notice; 
(vii) The policy may provide that if, at any time, so 
long as premiums are duly paid, the variable 
death benefit is less than it would have been if 
no loan or withdrawal had ever been made, the 
p>olicy holder may increase such variable death 
benefit up to what it would have been if there 
had been no loan or withdrawal by paying an 
amount not exceeding 1 10 percent of the 
corresponding increase in cash value and by 
furnishing such evidence of insurability as the 
insurer may request; 
(viii) The poUcy may specify a reasonable minimum 
amount which may be borrowed at any time 
but such minimum shall not apply to any 
automatic premium loan provision; 

(ix) No policy loan provision is required if the 
policy is under the extended insurance 
non-forfeiture option; 
(x) In addition to the foregoing, the policy may 
contain partial surrender provision; however, 
any such provision shall provide that the 
policyholder may request part of the cash 
value and both the variable and minimum 
death benefits will be reduced Ln proportion to 
the percentage of the cash value received by 
the policyholder and the premium for the 
remaining amount of insurance will also be 
reduced to the appropriate rates for the re- 
duced amount of insurance. The policy may 
provide that a partial surrender provision shall 
not require the insurer to reduce the amount of 
the minimum death benefit to less than the 
lowest amount of minimum death benefit 
which would have been issued to the insured 



under the insurance plans of the insurer at the 
time the policy was issued. The policy must 
clearly provide that the policyholder has the 
option of electing to exercise the cash value 
privileges of the policy loan or partial with- 
drawal provision rather than the partial surren- 
der provision; 
(xi) All policy loan, partial withdrawal, or partial 
surrender provisions shall be constructed so 
that variable life insurance policyholders who 
have not exercised such provision are not 
disadvantaged by the exercise thereof; 
(xii) Monies paid to the policyholders upon the 
exercise of any pwlicy loan, partial withdrawal, 
or partial surrender provision shall be with- 
drawn from the separate account and shall be 
returned to the separate account upon repay- 
ment except that a stock insurer may provide 
the monies for policy loans from the general 
account. 
(5) Other Policy Provisions. The following provi- 
sions may in substance be included in a variable 
Ufe insurance policy or related form delivered or 
issued for delivery in this state: 

(a) An exclusion for suicide within two years of the 
policy issue date; 

(b) Incidental insurance benefits may be offered on 
a fixed basis only; 

(c) Policies issued on a participating basis shall 
offer to pay dividend amounts in cash. In 
addition, such policies may offer the following 
dividend options. 

(i) The amount of the dividend may be credited 

against premium payments; 
(ii) The amount of the dividend may be applied to 

provide paid-up amounts of additional fixed 

benefit whole life insurance; 
(iii) The amount of the dividend may be applied to 

provide paid-up amounts of additional variable 

life insurance; 
(iv) The amount of the dividend may be deposited 

in the general account at a specified minimum 

rate of interest; 
(v) The amount of the dividend may be applied to 

provide paid-up amounts of fixed benefit 

one-year term insurance; 
(vi) The amount of the dividend may be deposited 

as a variable deposit in the separate account if 

the separate account is exempt pursuant to 

Section 3(c)(ll) of the Investment Company 

Act of 1940; 

(d) A provision allowing the policyholder to elect in 
writing in the application for the policy or 
thereafter an automatic premium loan on a basis 
not less favorable than that required of policy 
loans or partial withdrawals under (4) of this 
Rule except that a restriction that no more than 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1769 



PROPOSED RULES 



two consecutive premiums can be paid under 
this provision may be imposed. 

Statutory Authority G.S. 58-2-40; 58-7-95. 

.0449 LIMITED JNITIAL DEATH BENEFIT 

No policy or certificate of life insurance which provides 
a limited death benefit for a stated initial period shall be 
issued except on a guaranteed issue basis. Such policy 
should shall have printed on the face in bold type Graded 
Death Benefit. 

Statutory Authority G.S. 58-2-40; 58-3-150; 58-58-1. 

.0460 PREARRANGEMENT INSURANCE 
DISCLOSURE 

Tho amount of proarrongomont insuranco policy procoods 
jKiyabl e to tho provid e r of a fun e ral oer i 'io e und e r a pr a ar 
rong e m e nt oontraot shall not oxoood tho looGor of tho totjil 
cost of tho funeral service or tho policy procoods. 

Statutory Authority G.S. 58-2-40; 58-58-1; 58-60-35. 

SECTION .0500 - ACCIDENT AND HEALTH: 
GENERAL NATURE 

.0552 TEMPOROMANDIBULAR JOD^ 
DYSFUNCTION 

Policios — providing — surgical, — modical — aed — in hospital 
b e n e fits may not bo oxoluded wh e n tr e atm e nt for t e mpore 
mandibular joint dyofunotion is oauood — by dis e as e — er 
accident. — Howovor. treatment porformod by prosthesis 
plaood directly on tho tooth may bo oxcludcd. 

Statutory Authority G.S. 58-2-40; 58-51-1; 58-51-95; 
58-65-85. 

.0562 UNEARNED PREMIUM 

As used in this Rule, "unearned premium" means that 
portion of the premium representing the unexpired portion 
of the policy term. All insurers of individual health or 
accident and health insurance shall in the event of cancella- 
tion or the death of the insured return any portion of 
unearned premium. 

Statutory Authority G.S. 58-2-40(1). 

SECTION .0800 - MEDICARE SUPPLEMENT 
INSURANCE 

.0822 LOSS RATIO STANDARDS AND REFUND 
OR CREDIT OF PREMIUM 

(a) Loss Ratio Standards: 
(1) A Medicare supplement policy form or certifi- 
cate form shall not be delivered or issued for 
delivery unless the policy form or certificate 
form can be expected, as estimated for the entire 



jjeriod for which rates are computed to provide 
coverage, to return to policyholders and certifi- 
cate holders in the form of aggregate benefits 
(not including anticipated refunds or credits) 
provided under the policy form or certificate 
form: 

(A) At least 75 percent of the aggregate amount of 
premiums earned in the case of group policies, 
or 

(B) At least 65 percent of the aggregate amount of 
premiums earned in the case of individual 
policies, calculated on the basis of incurred 
claims experience, or incurred health care 
expenses where coverage is provided by a 
health maintenance organization on a service 
rather than reimbursement basis, and earned 
premiums for such period and in accordance 
with accepted actuarial principles and prac- 
tices. 

(2) All filings of rates and rating schedules shall 
demonstrate that expected claims in relation to 
premiums comply with the requirements of this 
Section when combined with actual experience to 
date. Filings of rate revisions shall also demon- 
strate that the anticipated loss ratio over the 
entire future period for which the revised rates 
are computed to provide coverage can be ex- 
pected to meet the appropriate loss ratio stan- 
dards. 

(3) For the purposes of Subparagraph (a)(1) of this 
Rule, group policies sold or solicited on individ- 
ual bases by mail or mass media advertising 
shall be deemed to be group policies. 

(4) For policies issued before October 16, 1991. 
expected claims in relation to premium shall 
meet: 

(A) The originally filed anticipated loss ratio when 
combined with the actual experience since 
inception; 

(B) The appropriate loss ratio requirements from 
Parts (a)(1)(A) and £B} of this Rule when 
combined with actual experience beginning 
with December j^ 1995 to date; and 

(C) The appropriate loss ratio requirement from 
Parts (a)(1)(A) and (B) of this Rule over the 
entire future period for which the rates are 
computed to provide coverage. 

(b) Refund or Credit Calculation: 
(1) An issuer shall collect and file with the Commis- 
sioner by May 31 of each year the data con- 
tained in the reporting form for each type in a 
standard Medicare supplement benefit plan. 
This Information shall be filed with the Life and 
Health Division. The reporting form shall be in 
the format prescribed by the NAIC in Appendix 
A of the Model Regulation to Implement the 
NAIC Medicare Supplement Insurance Minimum 



1770 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Standards Mcxlel Act, as adopted July 30, 1991, 
including any subsequent amendments and 
editions. A copy of this format is on file at the 
North Carolina Department of Insurance. 
Copies may be obtained from the Department at 
a cost of two dollars and fifty cents ($2.50) 
each. 

(2) If on the basis of the experience as reported the 
benchmark ratio since inception (ratio 1) exceeds 
the adjusted experience ratio since inception 
(ratio 3), then a refund or credit calculation is 
required. The refund calculation shall be done 
on a statewide basis for each type in a standard 
Medicare supplement benefit plan. For purposes 
of the reftind or credit calculation, experience on 
fwUcies issued within the reporting year shall be 
excluded. 

(3) A refiind or credit shall be made only when the 
benchmark loss ratio exceeds the adjusted expe- 
rience loss ratio and the amount to be refunded 
or credited exceeds a de minimis level. Such 
refund shall include interest from the end of the 
calendar year to the date of the refund or credit 
at a rate specified by the Secretary of Health and 
Human Services, but in no event shall it be less 
than the average rate of interest for 13-week 
Treasury notes. A refund or credit against 
premiums due shall be made by September 30 
following the experience year upon which the 
refund or credit is based. 

(4) For policies or certificates issued before October 
16. 1991. the issuer shall make the refund or 
credit calculation separately for all individual 
policies combined and all other group policies 
combined for experience after December 1. 
1995. The first report is due by May 31. 1997. 

(c) Annual Filing of Premium Rates. An issuer of 
Medicare supplement policies and certificates issued in this 
state shall file annually its rates, rating schedule and 
supporting documentation, including ratios of incurred losses 
to earned premiums by policy duration, for approval by the 
Commissioner in accordance with the filing requirements 
and procedures prescribed by statute or rule. The support- 
ing documentation shall also demonstrate in accordance with 
actuarial standards of practice using reasonable assumptions 
that the appropriate loss ratio standards can be expected to 
be met over the entire period for which rates are computed. 
Such demonstration shall exclude active life reserves. An 
expected third-year loss ratio that is greater than or equal to 
the applicable percentage shall be demonstrated for policies 
or certificates in force less than three years. As soon as 
practicable, but prior to the effective date of enhancements 
in Medicare benefits, every issuer of Medicare supplement 
policies or certificates in this state shall file with the 
Commissioner, in accordance with the applicable filing 
procedures of this state: 

(1) Appropriate premium adjustments necessary to 



produce loss ratios as anticipated for the current 
premium for the applicable policies or certifi- 
cates. Such supfKJrting documents as necessary 
to justify the adjustment shall accompany the 
filing. 

(A) An issuer shall make such premium adjust- 
ments as are necessary to produce an expected 
loss ratio under such policy or certificate that 
will conform with minimum loss ratio stan- 
dards for Medicare supplement policies, and 
which are expected to result in a loss ratio at 
least as great as that originally anticipated in 
the rates used to produce current premiums by 
the issuer for such Medicare supplement 
policies or certificates. No premium adjust- 
ment which would modify the loss ratio expe- 
rience under the policy other than the adjust- 
ments described herein should be made with 
respect to a jxsUcy at any time other than upon 
its renewal date or anniversary date. 

(B) If an issuer fails to make premium adjustments 
acceptable to the Commissioner, the Commis- 
sioner may order premium adjustments, re- 
fiinds, or premium credits deemed necessary to 
achieve the loss ratio required by this Rule. 

(2) Any appropriate riders, endorsements or policy 
forms needed to accomplish the Medicare sup- 
plement policy or certificate modifications 
necessary to eliminate benefit duplications with 
Medicare. Such riders, endorsements or policy 
forms shall provide a clear description of the 
Medicare supplement benefits provided by the 
policy or certificate, 
(d) Public Hearings. The Commissioner may conduct a 
public hearing to gather information concerning a request by 
an issuer for an increase in a rate for a policy form or 
certificate form, if the experience of the form for the 
previous reporting period is not in compliance with the 
applicable loss ratio standard. The determination of 
compliance is made without consideration of any refund or 
credit for such reporting period. Public notice of such 
hearing shall be furnished in the manner prescribed by 
statute. 

Statutory Authority G.S. 58-2-40; 58-54-20. 

,0824 REQUIRED DISCLOSURE PROVISIONS 

(a) General Rules. 
(1) Medicare supplement policies and certificates 
shall include a renewal or continuation provi- 
sion. The language or specifications of such 
provisions must be consistent with the type of 
contract issued. Such provision shall be appro- 
priately captioned and shall appear on the first 
page of the policy, and shall include any reser- 
vation by the issuer of the right to change premi- 
ums and any automatic renewal premium in- 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1771 



PROPOSED RULES 



creases based on the policyholder's age. 

(2) Except for riders or endorsements by which the 
issuer effectuates a request made in writing by 
the insured, exercises a specifically reserved 
right under a Medicare supplement policy, or is 
required to reduce or eliminate benefits to avoid 
duplication of Medicare benefits, all riders or 
endorsements added to a Medicare supplement 
policy after date of issue or at reinstatement or 
renewal which reduce or eliminate benefits or 
coverage in the policy shall require a signed 
acceptance by the insured. After the date of 
policy or certificate issue, any rider or endorse- 
ment which increases benefits or coverage with 
a concomitant increase in premium during the 
policy term shall be agreed to in writing signed 
by the insured, unless the benefits are required 
by the minimum standards for Medicare supple- 
ment policies, or if the increased coverage is 
required by law. Where a separate additional 
premium is charged for benefits provided in 
connection with riders or endorsements, such 
premium charge shall be set forth in the policy. 

(3) Medicare supplement policies or certificates 
shall not provide for the payment of benefits 
based on standards described as "usual and 
customary," "reasonable and customary" or 
words of similar import. 

(4) If a Medicare supplement policy or certificate 
contains any limitations with respect to preexist- 
ing conditions, such limitations shall appear as 
a separate paragraph of the policy and be labeled 
as "Preexisting Condition Limitations". 

(5) Medicare supplement policies and certificates 
shall have a notice prominently printed on the 
first page of the policy or certificate or attached 
thereto stating in substance that the policyholder 
or certificateholder shall have the right to return 
the policy or certificate within 30 days of its 
delivery and to have the premium refunded if, 
after examination of the policy or certificate, the 
insured person is not satisfied for any reason. 

(6) Issuers of accident and health policies or certifi- 
cates which provide hospital or medical expense 
coverage on an expense incurred or indemnity 
baoio, oth e r than incid e ntally, basis to persons 
eligible for Medicare by reason of ag e shall 
provide to such applicants a copy of the Modi 
caro Supplement Buyer's Guido Guide to Health 
Insurance for People with Medicare in the form 
developed jointly by the National Association of 
Insurance Commissioners and the Health Care 
Financing Administration in a type size no 
smaller than 12-point type. Delivery of the 
Buyer's Guide shall be made whether or not 
such policies or certificates are advertised, 
solicited or issued as Medicare supplement 



policies or certificates as defined in this Rule. 
Except in the case of direct response issuers, 
delivery of the Buyer's Guide shall be made to 
the applicant at the time of application and 
acknowledgement of receipt of the Buyer's 
Guide shall be obtained by the issuer. Direct 
response issuers shall deliver the Buyer's Guide 
to the applicant upon request but not later than 
at the time the policy is delivered. 

(b) Notice Requirements. 

(1) As soon as practicable, but no later than 30 days 
prior to the annual effective date of any Medi- 
care benefit changes, an issuer shall notify its 
policyholders and certificate holders of modifica- 
tions it has made to Medicare supplement poli- 
cies or certificates in a format acceptable to the 
Commissioner. Such notice shall: 

(A) Include a description of revisions to the Medi- 
care program and a description of each modifi- 
cation made to the coverage provided under 
the Medicare supplement policy or certificate, 
and 

(B) Inform each policyholder or certificateholder 
as to when any premium adjustment is to be 
made due to changes in Medicare. 

(2) The notice of benefit modifications and any 
premium adjustments shall be in outline form 
and in clear and simple terms so as to facilitate 
comprehension. 

(3) Such notices shall not contain or be accompanied 
by any solicitation. 

(c) Outline of coverage requirements for Medicare 
supplement policies. 

(1) Issuers shall provide an outline of coverage to 
each applicant at the time application is pre- 
sented to the prospective applicant and, except 
for direct response policies, shall obtain an 
acknowledgement of receipt of such outline from 
the applicant; and 

(2) If an outline of coverage is provided at the time 
of application and the Medicare supplement 
policy or certificate is issued on a basis which 
would require revision of the outline, a substi- 
tute outline of coverage properly describing the 
f)olicy or certificate shall accompany such policy 
or certificate when it is delivered and contain the 
following statement, in no less than 12 point 
type, immediately above the company name: 

"NOTICE: Read this 
outline of coverage 
carefully. It is not iden- 
tical to the outline of 
coverage provided upon 
application and the cov- 
erage originally applied 
for has not been is- 
sued. " 



1772 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



(3) The outline of coverage provided to applicants 
pursuant to this Rule consists of four parts: a 
cover page, premium information, disclosure 
pages, and charts displaying the features of each 
benefit plan offered by the issuer. The outline 
of coverage shall be in the language and format 
prescribed in Subparagraph (c)(4) of this Rule in 
no less than 12-point type. All plans A-J shall 
be shown on the cover page, and the plan or 
plans offered by the issuer shall be prominently 
identified. Premium information for the plan or 
plans offered shall be shown on the cover page 
or immediately following the cover page and 
shall be prominently displayed. The premium 
and mode shall be stated for each plan that is 
offered to the prospective applicant. All possi- 
ble premiums for the prospective applicant shall 
be illustrated. 

(4) The outline of coverage shall be in the language 
and format as prescribed by the NAIC in Section 
16C(4) of the Model Regulation to Implement 
the NAIC Medicare Supplement Insurance 
Minimum Standards Model Act, as adopted July 
30, 1991, including any subsequent amendments 
and editions. A copy of this format is on file 
with the North Carolina Department of Insur- 
ance. Copies may be obtained at a cost of 
fourteen dollars ($14.00) each from the Life and 
Health Division, 430 N. Salisbury Street, Ra- 
leigh, North Carolina 27611. 

(d) Notioo r e garding polioi e o or o e rtifioat e o which ar e not 
Modicaro supplamont policioo. — i\ny accident and health 
insuranoo policy or cortificato, — other than a Modicaro 
Buppl e mont policy; or a policy ioou e d purouont to a contract 
undor o e otion 1 8 76 or o e otion 1 8 33 of tho F e d e ral Social 
Security Act ('12 U.S.C. 1395 ot.soq.), disability income 
policy; basic, catastrophic, or major modicai oxponso policy; 
singl e — pr e mium — nonr e n e wabl e — policy — or other policy 
id e ntifi e d in 11 NCAC 12 .0 8 16(b), issued for d e liv e r>' in 
this state to persons oligiblo for Modicaro by reason of ago 
shall notify insureds undor tho policy that tho policy is not 
a M e dicar e oupploment policy or oertlFioat e . — Such notic e 
shall e ithor be print e d or attach e d to th e first pag e of th e 
outlino of Govorago dolivorod to insureds undor tho policy, 
or if no outline of covomgo is dolivorod, to tho first page of 
th e policy or c e rtificat e d e liv e r e d to insur e ds. — Such notic e 
shall b e in no l e ss than 12 point t^'p e and shall contain th e 
following language: 

"THIS [POUCY OR CERTIFICATE] IS 
NOT A MEDICARE SUPPLEMENT 
[POUCY OR CERTIFICATE]. If you are 
oligiblo for Modicaro, review tho Modi 
caro Supplement Buyer's Guide available 
from th e company." 
(d) Notice regarding policies or certificates that are not 
Medicare supplement policies. 

(1) For any accident and health insurance policy or 



certificate, other than a Medicare supplement 
policy; policy issued pursuant to a contract 
under section 1876 or section 1833 of the Fed- 
eral Social Security Act (42 U.S.C. 1395 
et.seq.); disability income policy; basic, cata- 
strophic, or major medical expense policy; 
single premium nonrenewable policy; or other 
policy identified in 11 NCAC 12 .0816(b), that 
is issued for delivery in this State to persons 
eligible for Medicare, the insurer shall notify 
insureds under the p>olicv that the policy is not a 
Medicare supplement policy or certificate. The 
notice shall either be printed or attached to the 
first page of the outline of coverage delivered to 
insureds under the policy; or if no outline of 
coverage is delivered, to the first page of the 
policy or certificate delivered to insureds. The 
notice shall be in no less than 12 point type and 
shall contain the following language: 
"THIS [POUCY OR CERTIFICATE! IS NOT A 
MEDICARE SUPPLEMENT [POUCY OR 
CERTinCATE], If you are eligible for Medicare, 
review the Guide to Health Insurance for People 
with Medicare, which is available from the com 
pany." 

Applications provided to persons eligible for 
Medicare to purchasing the policies or certifi- 
cates described in Subparagraph (d)(1) of this 
Rule shall disclose, using the applicable 
disclosurestatement in the format prescribed by 
the NAIC in Appendix C of the Model Regula- 
tion, the extent to which the policy duplicates 
Medicare. The disclosure statement shall be 
provided as a part of, or together with, the 
application for the policy or certificate. A copy 
of this format is on file at the Department. 
Copies may be obtained from the Department at 
a cost of two dollars and fifty cents ($2.50) 
each. 



Statutory Authority G.S. 58-2-40; 58-54-25. 



£2} 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1773 



PROPOSED RULES 



.0825 REQUIREMENTS FOR APPLICATION FORMS AND REPLACEMENT COVERAGE 

(a) Application forms shall include the following statements and questions designed to elicit information as to whether, 
as of the date of the application, the applicant has another Medicare supplement or other health insurance policy or certificate 
in force or whether a Medicare supplement policy or certificate is Intended to replace any other accident and health policy 
or certificate presently in force. A supplementary application or other form to be signed by the applicant and agent 
containing such questions and statements may be used. 

[Statements] 

(1) You do not need more than one Medicare supplement policy. 

(2) If you are 65 or old e r, you may b e e ligibl e for benofito und e r Medioaid and may 
not nood a Modioaro supplement policy. If you purchase this policy, you may 
want to evaluate your existing health coverage and decide if you need multiple 
coverages. You may be eligible for benefits under Medicaid and may not need 
a Medicare supplement policy. 

(3) TTie benefits and premiums under your Medicare supplement policy will be 
suspended during your entitlement to benefits under Medicaid for 24 months. 
You must request this suspension within 90 days of becoming eligible for 
Medicaid. If you are no longer entitled to Medicaid, your policy will be 
reinstituted if requested within 90 days of losing Medicaid eligibility. 

(4) CounfloUng aop i 'icos may bo available in your state to provide advico ooncoming 
your purchas e of M e dicar e ouppl e m e nt inourano e and oono e ming Modiooid. 
Counseling services may be available in your state to provide advice concerning 
your purchase of Medicare supplement insurance and concerning medical 
assistance through the state Medicaid program, including benefits as a Qualified 
Medicare Beneficiary (0MB) and a specified Low-Income Medicare Beneficiary 
(SLMB). 

[Questions] 

To the best of your knowledge, 

fi} Do you have another Medicare supplement fwlicy or oortifioate in force 

(including health care — ser i 'ioe — contract, — health — maintonanco — organization 

oontraot)? 
If oo, with which company? 

(3) Do you have any other health insurance pwlicios that provide bonofits which this 

Medicare supplement policy would duplicate? 

fA) If so, with which company? 

(B) What kind of policy? 

(3) If the answer to question 1 or 2 is yes, do you intend to replace those medical 

or health policies with this policy [certificate]? 
{A) Ar e you cover e d by Medicaid? 

(1) Do you have another Medicare supplement policy or certificate in force (including health care 

service contract, health maintenance organization contract)? 

(a) If so, with which company? 

(b) If so, do you intend to replace your current Medicare supplement policy [certificate]? 
£2) E>o you have any other health insurance coverage that provides benefits similar to this Medicare 

supplement policy? 

(3) Are you covered for medical asistance through the state Medicaid program: 

(a) As a Specified Low-Income Medicare Beneficiary (SLMB)? 

(b) As a Qualified Medicare Beneficiary (QMB)? 

(c) For other Medicaid medical benefits? 

(4) Agents shall list any other health insurance policies they have sold to the applicant. 

(a) List policies sold which are still in force. 

(b) List policies sold in the past five years which are no longer in force. 
fb) Agents shall list any other health insurance policies thoy have sold to the applicant. 

(4^ List policies sold which are still in force. 



1774 NORTH CAROLINA REGISTER November 15, 1995 10:16A 



i 



PROPOSED RULES 



(^ List policios sold in tho post fivo yooro which are no longor in force. 

{b) (e) In the case of a direct resf)onse issuer, a copy of the application or supplemental form, signed by the applicant and 
acknowledged by the issuer, shall be returned to the applicant by the issuer upon delivery of the policy. 

(c) (d) Upon determining that a sale will involve replacement of Medicare supplement coverage, any issuer, other than 
a direct response issuer or its agent, shall furnish the applicant, prior to issuance or delivery of the Medicare supplement 
policy or certificate, a notice regarding replacement of Medicare supplement coverage. One copy of such notice signed by 
the applicant and the agent, except where the coverage is sold without an agent, shall be provided to the applicant and an 
additional signed copy shall be retained by the issuer. A direct response issuer shall deliver to the applicant at the time of 
the issuance of the policy the notice regarding replacement of Medicare supplement coverage. 

£d} (^ The notice required by Paragraph (d) of this Rule for an issuer shall be provided in substantially the following form 
in no less than 40 12-point type: 

NOTICE TO APPLICANT REGARDING REPLACEMENT 
OF MEDICARE SUPPLEMENT INSURANCE 

(Insurance company's name and address) 

SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE 

According to [your application] [information you have fiimished], you intend to terminate existing Medicare 
supplement insurance and replace it with a policy to be issued by [company name] Insurance Company. 
Your new policy will provide 30 days within which you may decide without cost whether you desire to 
keep the policy. 

You should review this new coverage carefully. Compare it with all accident and sickness coverage you 
now have. T e rminat e your pr e s e nt policy only if after du e oonoidoration, you Fmd that purohao e of thio 
Modicaro supplomont covorago is a wise decision. If. after due consideration, you find that purchase of 
this Medicare supplement coverage is a wise decision, you should terminate your present Medicare 
su pplement coverage. You should evaluate the need for other accident and sickness coverage vou have that 
may duplicate this policy. 

STATEMENT TO APPLICANT BY ISSUER OR AGENT [BROKER OR OTHER REPRESENTATIVE]: 

I have reviewed your current medical or health insurance coverage. The replacement of insurance involved 
in this transaction does not duplicate coverage, to the best of my knowledge. The replacement policy is 
being purchased for the following reason(s) (check one): 

Additional benefits. 

No change in benefits, but lower premiums. 

Fewer benefits and lower premiums. 

Other. (Please specify) 



(1) Health conditions which you may now have (preexisting conditions) may not be 
immediately or fully covered under the new policy if you have had your present 
policy for less than six months. 

(2) If you still wish to terminate your present policy and replace it with new 
coverage, be certain to truthfully and completely answer all questions on the 
application concerning your medical and health history. Failure to include all 
material medical information on an application may provide a basis for the 
company to deny any future claims and to refund your premium as though your 
policy had never been in force. After the application has been completed and 
before you sign it, review it carefully to be certain that all information has been 
properly recorded. [If the policy or certificate is guaranteed issue, this 
Paragraph need not appear.] 

Do not cancel your present policy until you have received your new policy and are sure that you want to 
keep it. 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1775 



PROPOSED RULES 



Signature of Agent, Broker or Other Representative 
[Typed Name and Address of Issuer, Agent or Broker] 



(Applicant's Signature) 
'"Signature not required for direct response sales. 



(Date) 



(e) ff) Paragraph 1 of the replacement notice (applicable to pre-existing conditions) may be deleted by an issuer if the 
replacement does not involve application of a new pre-existing condition limitation. 



Statutory Authority G.S. 58-2-40; 58-54-25. 

.0835 MEMMUM BENEFIT STANDARDS ON 
OR AFTER JANUARY 1, 1992 

The following standards are applicable to all Medicare 

supplement policies or certificates delivered or issued for 

delivery in this State on or after January 1, 1992. No 

policy or certificate may be advertised, solicited, delivered, 

or issued for delivery in this State as a Medicare supplement 

policy or certificate unless it complies with these benefit 

standards. 

( 1 ) General Standards. The following standards apply 

to Medicare supplement policies and certificates 

and are in addition to all other requirements of 

this Section. 

(a) A Medicare supplement policy or certificate 
shall not exclude or limit benefits for loss in- 
curred more than six months from the effective 
date of coverage because it involved a 
pre-existing condition. The policy or certificate 
may not define a pre-existing condition more 
restrictively than a condition for which medical 
advice was given or treatment was recommended 
by or received from a physician within six 
months before the effective date of coverage. 

(b) A Medicare supplement policy or certificate 
shall not indemnify against losses resulting from 
sickness on a different basis than losses resulting 
from accidents. 

(c) A Medicare supplement policy or certificate 
shall provide that benefits designed to cover cost 
sharing amounts under Medicare wiU be changed 
automatically to coincide with any changes in the 
applicable Medicare deductible amount and 
copayment percentage factors. Premiums may 
be modified to correspond with such changes, 
but new premiums must be filed and approved 
by the Commissioner before use. 

(d) No Medicare supplement policy or certificate 
shall provide for termination of coverage of a 
spouse solely because of the occurrence of an 
event specified for termination of coverage of 
the insured, other than nonpayment of premium. 

(e) Each Medicare supplement policy shall be 



guaranteed renewable and: 



(i) 



(ii) 



(iii) 



(B) 



(iv) 



(0 



The issuer shall not cancel or fail to renew the 
policy solely on the ground of health status of 
the individual. 

The issuer shall not cancel or fail to renew the 
policy for any reason other than nonpayment 
of premium or material misrepresentation. 
If the Medicare supplement policy is termi- 
nated by the group policyholder and is not 
replaced as provided under Subparagraph 
(l)(e)(v) of this Rule, the issuer shall offer 
each certificateholder an individual Medicare 
supplement policy that, at the option of the 
certificateholder: 
(A) Provides for continuation of the benefits 
contained in the group policy, or 
Provides for such benefits as otherwise 
meet the requirements of this Rule. 
If an individual is a certificateholder in a 
group Medicare supplement policy and the 
individual terminates membership in the group, 
the issuer shall either: 

(A) Offer the certificateholder the conversion 
opportunity described in Subparagraph 
(l)(e)(iii) of this Rule; or 

(B) At the option of the group policyholder, 
offer the certificateholder continuation of 
coverage under the group policy. 

(v) If a group Medicare supplement policy is 
replaced by another group Medicare supple- 
ment policy purchased by the same policy- 
holder, the succeeding issuer shall offer cover- 
age to all persons who were covered under the 
old group policy on its date of termination. 
Coverage imder the new policy shall not result 
in any exclusion for pre-existing conditions 
that would have been covered under the group 
policy being replaced. 
Termination of a Medicare supplement policy or 
certificate shall be without prejudice to any 
continuous loss that commenced while the policy 
was in force, but the extension of benefits 



1776 



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November 15, 1995 10:16A 



PROPOSED RULES 



I 



\ 



beyond the period during which the policy was 
in force may be conditioned u|X)n the continuous 
total disability of the insured, limited to the 
duration of the policy benefit period, if any, or 
payment of the maximum benefits, 
(g) Suspension During Medicaid Eligibility. 

(i) A Medicare supplement policy or certificate 
shall provide that benefits and premiums under 
the policy or certificate shall be suspended at 
the request of the policyholder or 
certificateholder for the period, not to exceed 
24 months, in which the policyholder or 
certificateholder has applied for and is deter- 
mined to be entitled to medical assistance 
under Title XIX of the Social Security Act, but 
only if the policyholder or certificateholder 
notifies the issuer of such policy or certificate 
within 90 days after the date the individual 
becomes entitled to such assistance. Upon 
rocoipt of timely notico, the ioouor ahall return 
to the policyholder or cortificatoholdor that 
portion of th e premium attributabl e to th e 
p e riod of M e dicaid e ligibility', oubj e ot to ad 
juatmont for paid claims. 
(ii) If such suspension occurs and if the policy- 
holder or certificateholder loses entitlement to 
such medical assistance, such policy or certifi- 
cate shall be automatically reinstituted (effec- 
tive as of the date of termination of such 
entitlement) as of the termination of such 
entitlement if the policyholder or 
certificateholder provides notice of loss of such 
entitlement within 90 days after the date of 
such loss and pays the premium attributable to 
the period, effective as of the date of termina- 
tion of such entitlement, 
(iii) Reinstitution of such coverages: 

(A) Shall not provide for any waiting period 
with respect to treatment of pre-existing 
conditions; 

(B) Shall provide for coverage that is substan- 
tially equivalent to coverage in effect 
before the date of such suspension; and 

(C) Shall provide for classification of premi- 
ums on terms at least as favorable to the 
policyholder or certificateholder as the 
premium classification terms that would 
have applied to the policyholder or 
certificateholder had the coverage not been 
suspended. 

(2) Standards for Basic ("Core") Benefits Common to 
All Benefit Plans: Every issuer shall make avail- 
able a policy or certificate including only the 
following basic "core" package of benefits to each 
prospective insured. An issuer may make avail- 
able to prospective insureds any of the other 
Medicare Supplement Benefit Plans in addition to 



the basic "core" package, but not in lieu thereof. 

(a) Coverage of Part A Medicare eligible expenses 
for hospitalization to the extent not covered by 
Medicare from the 61st day through the 90th 
day in any Medicare benefit period; 

(b) Coverage of Part A Medicare eligible expenses 
incurred for hospitalization to the extent not 
covered by Medicare for each Medicare lifetime 
inpatient reserve day used; 

(c) Upon exhaustion of the Medicare hospital inpa- 
tient coverage including the lifetime reserve 
days, coverage of the Medicare Part A eligible 
expenses for hospitalization paid at the Diagnos- 
tic Related Group (DRG) day outlier per diem or 
other appropriate standard of payment, subject to 
a lifetime maximum benefit of an additional 365 
days; 

(d) Coverage under Medicare Parts A and B for the 
reasonable cost of the first three pints of blood 
(or equivalent quantities of packed red blood 
cells, as defined under federal regulations) 
unless replaced in accordance with federal 
regulations; 

(e) Coverage for the coinsurance amount of Medi- 
care eligible expenses under Part B regardless of 
hospital confinement, subject to the Medicare 
Part B deductible. 

(3) Standards for Additional Benefits. The following 
additional benefits shall be included in Medicare 
Supplement Benefit Plans "B" through "J" only as 
provided by 11 NCAC 12 .0836. 

(a) Medicare Part A Deductible: Coverage for all 
of the Medicare Part A inpatient hospital deduct- 
ible amount per benefit period. 

(b) Skilled Nursing Facility Care: Coverage for the 
actual billed charges up to the coinsurance 
amount from the 21st day through the 100th day 
in a Medicare benefit period for posthospital 
skilled nursing facility care eligible under Medi- 
care Part A. 

(c) Medicare Part B Deductible: Coverage for all 
of the Medicare Part B deductible amount per 
calendar year regardless of hospital confinement. 

(d) Eighty percent of the Medicare Part B Excess 
Charges: Coverage for 80 percent of the differ- 
ence between the actual Medicare Part B charge 
as billed, not to exceed any charge limitation 
established by the Medicare program or state 
law, and the Medicare-approved Part B charge. 

(e) One Hundred Percent of the Medicare Part B 
Excess Charges: Coverage for all of the differ- 
ence between the actual Medicare Part B charge 
as billed, not to exceed any charge limitation 
established by the Medicare program or State 
law, and the Medicare-approved Part B charge. 

(f) Basic Outpatient Prescription Drug Benefit: 
Coverage for 50 percent of outpatient prescrip- 



10:16A 



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November 15, 1995 1777 



PROPOSED RULES 



tion drug charges, after a two hundred fifty 
dollar ($250.00) calendar year deductible, to a 
maximum of one thousand two hundred fifty 
dollars ($1,250) in benefits received by the 
insured per calendar year, to the extent not 
covered by Medicare, 
(g) Extended Outpatient Prescription Drug Benefit: 

Coverage for 50 percent of outpatient prescrip- 
tion drug charges, after a two hundred fifty 
dollar ($250.00) calendar year deductible to a 
maximum of three thousand dollars ($3,000) in 
benefits received by the insured per calendar 
year, to the extent not covered by Medicare, 
(h) Medically Necessary Emergency Care in a 
Foreign Country: Coverage to the extent not 
covered by Medicare for 80 (jercent of the billed 
charges for Medicare eligible expenses for 
medically necessary emergency hospital, physi- 
cian and medical care received in a foreign 
country, which care would have been covered by 
Medicare if provided in the United States and 
which care began during the first 60 consecutive 
days of each trip outside the United States, 
subject to a calendar year deductible of two 
hundred fifty dollars ($250.00) and a lifetime 
maximum benefit of fifty thousand dollars 
($50,000). For purposes of this benefit, "emer- 
gency care" means care needed immediately 
because of an injury or an illness of sudden and 
unexpected onset. 
(i) Preventive Medical Care Benefit: Coverage for 

the following preventive health services: 
(i) An annual clinical preventive medical history 
and physical examination that may include tests 
and services from Subparagraph (3)(i)(ii) of 
this Rule and patient education to address 
preventive health care measures, 
(ii) Any one or a combination of the following 
preventive screening tests or preventive ser- 
vices, the frequency of which is considered 
medically appropriate: 

(A) Fecal occult blood test and/or digital rectal 
examination; 

(B) Mammogram; 

(C) Dipstick urinalysis for hematuria, bacteri- 
uria and proteinauria; 

(D) Pure tone (air only) hearing screening test, 
administered or ordered by a physician; 

(E) Serum cholesterol screening (every five 
years); 

(F) Thyroid function test; 

(G) Diabetes screening. 

(iii) Influenza vaccine administered at any appro- 
priate time during the year and Tetanus and 
Diptheria booster (every ten years). 

(iv) Any other tests or preventive measures deter- 
mined appropriate by the attending 



physician. Reimbursement shall be for the 
actual charges up to 100 percent of the Medi- 
care-approved amount for each service, as if 
Medicare were to cover the service as identi- 
fied in American Medical Association Current 
Procedural Terminology (AMA CPT) codes, 
to a maximum of one hundred twenty dollars 
($120.00) annually under this benefit. This 
benefit shall not include payment for any 
procedure covered by Medicare, 
(j) At-Home Recovery Benefit: Coverage for 

services to provide short term at-home assistance 
with activities of daily living for those recover- 
ing from an illness, injury or surgery, 
(i) For purposes of this benefit, the following 
definitions shall apply: 

(A) "Activities of daily living" include but are 
not limited to bathing, dressing, personal 
hygiene, transferring, eating, ambulating, 
assistance with drugs that are normally 
self-administered, and changing bandages 
or other dressings. 

(B) "Care provider" means a duly qualified or 
licensed home health aide/homemaker, 
personal care aide or nurse provided 
through a licensed home health care 
agency or referred by a licensed referral 
agency or licensed nurses registry. 

(C) "Home" means any place used by the 
insured as a place of residence, provided 
that such place would qualify as a resi- 
dence for home health care services cov- 
ered by Medicare. A hospital or skilled 
nursing facility shall not be considered the 
insured's place of residence. 

(D) "At-home recovery visit" means the period 
of a visit required to provide at-home 
recovery care, without limit on the dura- 
tion of the visit, except each consecutive 
four hours in a 24-hour period of services 
provided by a care provider is one visit. 

(ii) Coverage Requirements and Limitations. 

(A) At-home recovery services provided must 
be primarily services that assist in activi- 
ties of daily living. 

(B) The insured's attending physician must 
certify that the specific tyjje and frequency 
of at-home recovery services are necessary 
because of a condition for which a home 
care plan of treatment was approved by 
Medicare. 

(C) Coverage is limited to: 

(I) No more than the number and type of 
at-home recovery visits certified as 
necessary by the insured's attending 
physician. The total number of 
at-home recovery visits shall not ex- 



1778 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



I 



I 



. 



ceed the number of Medicare-approved 
home health care visits under a Medi- 
care-approved home care plan of treat- 
ment, 
(n) The actual charges for each visit up to 
a maximum reimbursement of forty 
dollars ($40.00) per visit. 
(in) One thousand six hundred dollars 

($1,600) per calendar year. 
(IV) Seven visits in any one week. 
(V) Care furnished on a visiting basis in 

the insured's home. 
(VI) Services provided by a care provider, 

as defined in this Rule. 
(VQ) At-home recovery visits while the 
insured is covered under the policy or 
certificate and not otherwise excluded. 
(Vni) At-home recovery visits received dur- 
ing the period the insured is receiving 
Medicare-approved home care services 
or no more than eight weeks after the 
service date of the last Medi- 
care-approved home health care visit, 
(iii) Coverage is excluded for: 

(A) Home care visits paid for by Medicare or 
other government programs; and 

(B) Care provided by family members, unpaid 
volunteers or providers who are not care 
providers. 

(k) New or Innovative Benefits: An issuer may, 
with the prior approval of the Commissioner, 
offer policies or certificates with new or innova- 
tive benefits in addition to the benefits provided 
in a policy or certificate that otherwise complies 
with the applicable standards. Such new or 
innovative benefits may include benefits that are 
appropriate to Medicare supplement insurance, 
new or innovative, not otherwise available, 
cost-effective, and offered in a manner that is 
consistent with the goal of simplification of 
Medicare supplement policies. 

Statutory Authority G.S. 58-2-40; 58-54-10; 58-54-15. 

.0837 OPEN ENROLLMENT 

(a) No issuer shall deny or condition the issuance or 
effectiveness of any Medicare supplement policy or certifi- 
cate available for sale in this State, nor discriminate in the 
pricing of such a policy or certificate because of the health 
status, claims experience, receipt of health care, or medical 
condition of an applicant where an application for such 
policy or certificate is submitted during the six-month period 
beginning with the first month in which an individual (who 
is aged 65 years or older) first e nroll e d is enrolled for 
benefits under Medicare Part B. Each Medicare supplement 
policy and certificate currently available from an issuer shall 
be made available to all applicants who qualify under this 



Rule without regard to age. No issuer shall use any method 
of marketing that discourages the sale of any approved plan 
to persons eligible for open enrollment. 

(b) Paragraph (a) of this Rule does not prevent the 
exclusion of benefits under a policy during the first six 
months, based on a pre-existing condition for which the 
jX)Ucyholder or certificateholder received treatment or was 
otherwise diagnosed during the six-month period before the 
policy became effective. 

Statutory Authority G.S. 58-2-40; 58-54-10 

.0839 MEDICARE SELECT POLICIES AND 
CERTIFICATES 

(a) No policy or certificate may be advertised as a 
Medicare Select policy or certificate unless it meets the 
requirements of this Rule. 

(h) For the purposes of this Rule: 

(1) "Complaint" means any dissatisfaction expressed 
by an individual concerning a Medicare Select 
issuer or its network providers. 

(2) "Grievance" means dissatisfaction expressed in 
writing by an individual insured under a Medi- 
care Select policy or certificate with the adminis- 
tration, claims practices, or provision of services 
concerning a Medicare Select issuer or its net- 
work providers. 

(3) "Medicare Select issuer" means an issuer offer- 
ing, or seeking to offer, a Medicare Select 
policy or certificate. 

(4) "Medicare Select policy" or "Medicare Select 
certificate" mean respectively a Medicare sup- 
plement policy or certificate that contains re- 
stricted network provisions. 

(5) "Network provider" means a provider of health 
care, or a group of providers of health care, 
which has entered into a written agreement with 
the issuer to provide benefits insured under a 
Medicare Select policy. 

(6) "Restricted network provision" means any 
provision which conditions the payment of 
benefits, in whole or in part, on the use of 
network providers. 

(7) "Service area" means the geographic area ap- 
proved by the Commissioner within which an 
issuer is authorized to offer a Medicare Select 
policy. 

(c) The Commissioner shall authorize an issuer to offer 
a Medicare Select policy or certificate, under this Rule and 
Section 4358 of the Omnibus Budget Reconciliation Act 
(OBRA) of 1990 if the Commissioner finds that the issuer 
has satisfied all of the requirements of this Rule. 

(d) A Medicare Select issuer shall not issue a Medicare 
Select policy or certificate in this State until its plan of 
operation has been approved by the Commissioner. 

(e) A Medicare Select issuer shall file a proposed plan of 
operation with the Commissioner. The plan of operation 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1779 



PROPOSED RULES 



shall contain at least the following information: 

(1) Evidence that all covered services that are 
subject to restricted network provisions are 
available and accessible through network provid- 
ers, including a demonstration that: 

(A) Services can be provided by network providers 
with reasonable promptness with respect to 
geographic location, hours of operation and 
after-hour care. The hours of operation and 
availability of after-hour care shall reflect 
usual practice in the local area. Geographic 
availability shall reflect the usual travel times 
within the community. 

(B) The number of network providers in the ser- 
vices area is sufficient, with respect to current 
and expected policyholders. 

(i) To adequately deliver all services that are 
subject to a restricted network provision; 
and 
(ii) To make appropriate referrals. 

(C) There are written agreements with network 
providers describing specific responsibilities. 

(D) Emergency care is available 24 hours per day 
and seven days per week. 

(E) In the case of covered services that are subject 
to a restricted network provision and are 
provided on a prepaid basis, there are written 
agreements with network providers prohibiting 
the providers from billing or otherwise seeking 
reimbursement from or recourse against any 
individual insured under a Medicare Select 
policy or certificate. This Paragraph shall not 
a pply to supplemental charges or coinsurance 
amounts as stated in the Medicare Select policy 
of certificate. 

(2) A statement or map providing a clear description 
of the services area. 

(3) A description of the grievance procedure to be 
utilized. 

(4) A description of the quality assurance program, 
including: 

(A) The formal organizational structure: 

(B) The written criteria for selection, retention, 
and removal of network providers; 

(O The procedures for evaluating quality of care 
provided by network providers, and the pro- 
cess to initiate corrective action when war- 
ranted. 

(5) A list and description, by specialty, of the 
network providers. 

(6) Copies of the written information proposed to be 
used by the issuer to comply with Paragraph (i) 
of this Rule. 

(f) A Medicare Select issuer shall file any proposed 
changes to the plan of operation, except for changes to the 
list of network providers, with the Commissioner before 
implementing the changes. Changes shall be considered 



a pproved by the Commissioner after 30 days unless specifi- 
cally disapproved. An updated list of network providers 
shall be filed with the Commissioner at least quarterly. 

(g) A Medicare Select policy or certificate shall not 
restrict payment for covered services provided by non- 
network providers if: 

(n The services are for symptoms requiring emer- 
gency care or are immediately required for an 
unforeseen illness, injury or a condition; and 
(2) It is not feasible to obtain services through a 
network provider, 
fh) A Medicare Select policy or certificate shall provide 
payment for full coverage under the policy for covered 
services that are not available through network providers, 
(i) A Medicare Select issuer shall make full and fair 
disclosure in writing of the provisions, restrictions, and 
limitations of the Medicare Select policy or certificate to 
each applicant. The disclosure shall include the following: 

(1) An outline of coverage that permits the applicant 
to compare the coverage and premiums of the 
Medicare Select policy or certificate with: 

(A) Other Medicare supplement policies or certifi- 
cates offered by the issuer; and 

(B) Other Medicare Select policies or certificates. 

(2) A description (including address, phone number 
and hours of operation) of the network provid- 
ers, including primary care physicians, specialty 
physicians, hospitals, and other providers. 

(3) A description of the restricted network provi- 
sions, including payments for coinsurance and 
deductibles when providers other than network 
providers are utilized. 

(4) A description of coverage for emergency and 
urgently needed care and other out-of-service 
area coverage. 

(5) A description of limitations on referrals to 
restricted network providers and to other provid- 
ers. 

(6) A description of the policyholder's rights to 
purchase any other Medicare supplement policy 
or certificate otherwise offered by the issuer. 

(7) A description of the Medicare Select issuer's 
quality assurance program and grievance proce- 
dure. 

(j) Before the sale of a Medicare Select policy or certifi- 
cate, a Medicare Select issuer shall obtain from the appli- 
cant a signed and dated form stating that the applicant has 
received the information provided under Paragraph (i) of 
this Rule and that the applicant understands the restrictions 
of the Medicare Select policy or certificate. 

Oc) A Medicare Select issuer shall have and use the 
following procedures for hearing complaints and resolving 
written grievances from the subscribers, which procedures 
shall be aimed at mutual agreement for settlement and may 
include arbitration procedures: 

(1) The grievance procedure shall be described in 
the policy and certificates and in the outline of 



1780 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



coverage. 

(2) At the time the policy or certificate is issued, the 
issuer shall provide detailed information to the 
policyholder describing how a grievance may be 
registered with the issuer. 

(3) Grievances shall be considered in a timely 
manner and shall be transmitted to appropriate 
decision-makers who have authority to fully 
investigate the issue and take corrective action. 

(4) If a grievance is found to be valid, corrective 
action shall be taken promptly. 

(5) All concerned parties shall be notified about the 
results of a grievance. 

(6) The issuer shall report no later than each March 
31st to the Commissioner regarding its grievance 
procedure. The report shall be in a format 
prescribed by the Commissioner and shall con- 
tain the number of grievances filed in the past 
year and a summary of the subject, nature and 
resolution of such grievances. 

(\) At the time of initial purchase, a Medicare Select 
issuer shall make available to each applicant for a Medicare 
Select policy or certificate the opportunity to purchase any 
Medicare supplement policy or certificate otherwise offered 
by the issuer. 

(m) At the request of an individual insured under a 
Medicare Select policy or certificate, a Medicare Select 
issuer shall make available to the individual insured the 
opportunity to pur chase a Medicare supplement policy or 
certificate offerei,! by the issuer which has comparable or 
lesser benefits and which does not contain a restricted 
network provision. TTie issuer shall make the policies or 
certificates available without requiring evidence of insurabil- 
ity after the Medicare Select policy or certificate has been 
in force for 6 months. For the purposes of this Paragraph, 
a Medicare supplement policy or certificate will be consid- 
ered to have comparable or lesser benefits unless it contains 
one or more significant benefits not included in the Medi- 
care Select policy or certificate being replaced. For the 
purposes of this paragraph, a significant benefit means 
coverage for the Medicare Part A deductible, coverage for 
prescription drugs, coverage for at-home recovery services, 
or coverage for Part B excess charges. 

(n) Medicare Select policies and certificates shall provide 
for continuation of coverage in the event the U.S. Secretary 
of Health and Human Services determines that Medicare 
Select policies and certificates issued under this Rule should 
be discontinued due to either the failure of the Medicare 
Select Program to be reauthorized under law or its substan- 
tial amendment. Each Medicare Select issuer shall make 
available to each individual insured under a Medicare Select 
policy or certificate the opportunity to purchase any Medi- 
care supplement policy or certificate offered by the issuer 
which has comparable or lesser benefits and which does not 
contain a restricted network provision. The issuer shall 
make the policies and certificate available without requiring 
evidence of insurability. For the purposes of this Para- 



graph, a Medicare supplement policy or certificate will be 
considered to have comparable or lesser benefits unless it 
contains one or more significant benefits not included in the 
Medicare Select policy or certificate being replaced. For 
the purposes of this Paragraph, a significant benefit means 
coverage for the Medicare Part A deductible, coverage for 
prescription drugs, coverage for at-home recovery services, 
or coverage for Part B excess charges. 

(o) A Medicare Select issuer shall comply with requests 
for data made by State or federal agencies, including the 
U.S. Department of Health and Human Services, for the 
purpose of evaluating the Medicare Select Program. 

Statutory Authority G.S. 58-2-40; 58-54-10; 58-54-15; 58- 
54-25. 

SECTION .1000 - LONG-TERM CARE INSURANCE 

.1004 POLICY PRACTICES AND PROVISIONS 

(a) The terms "guaranteed renewable" or "noncancella- 
ble" may not be used in any individual policy without 
further explanatory language in accordance with the disclo- 
sure requirements of 11 NCAC 12 .1006. No such policy 
issued to an individual shall contain renewal provisions other 
than "guaranteed renewable" or "noncancellable". 

(b) The term "guaranteed renewable" may be used only 
when the insured has the right to continue the policy in 
force by timely payments of premiums; during which period 
the insurer has no unilateral right to make any change in any 
provision of the policy while the policy is in force and can 
not refuse to renew: Provided that rates may be revised by 
the insurer on a class basis. 

(c) The word "noncancellable" may be used only when 
the insured has the right to continue the policy in force by 
timely payments of premiums; during which period the 
insurer has no right to unilaterally make any change in any 
provision of the policy or in the premium rate. 

(d) No policy may limit or exclude coverage by type of 
illness, treatment, medical condition, or accident, except as 
follows: 

(1) preexisting conditions as specified in G.S. 
58-55-30; 

(2) mental or nervous disorders, except for Alzhei- 
mer's Disease; 

(3) alcoholism and drug addiction; 

(4) illness, treatment, or medical condition arising 
out of: 

(A) war or act of war (whether declared or unde- 
clared); 

(B) participation in a felony, riot, or insurrection; 

(C) service in the armed forces or units auxiliary 
thereto; 

(D) suicide, attempted suicide, or intentionally 
self-inflicted injury; or 

(E) aviation activity as a nonfare-paying passenger; 

(5) treatment provided in a government facility 
(unless otherwise required by law); services for 



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1781 



PROPOSED RULES 



which benefits are available under Medicare 
(unless otherwise required by law) , under any 
other governmental program (except Medicaid), 
or under any state or federal workers' compen- 
sation, employer's liability, or occupational 
disease law; services provided by a member of 
the insured's immediate family; and services for 
which no charge is normally made in the ab- 
sence of insurance; 

(6) exclusions and limitations for payment for 
services provided outside the United States; and 

(7) legitimate variations in benefit levels to reflect 
differences in provider rates. 

(e) Termination of a policy shall be without prejudice to 
any benefits payable for institutionalization if the institution- 
alization began while the policy was in force and continues 
without interruption after termination. Such extension of 
benefits beyond the period during which the policy was in 
force may be limited to the duration of the benefit period, 
if any, or to payment of the maximum benefits; and may be 
subject to any policy waiting period and all other applicable 
provisions of the policy. 

Statutory Authority G.S. 58-2-40(1); 58-55-30(a). 

SECTION .1600 - RETAINED ASSET ACCOUNTS 

.1601 DEFTNITIONS 

As used in this Section: 

(1) "Policy" means any policy or certificate of insur- 
ance that provides a death benefit. 

(2) "Retained asset account" or "account" means any 
mechanism whereby the settlement of proceeds 
payable under a insurance policy is accomplished 
through the use of a temporary repository of 
proceeds into a checking or draft account in lieu 
of the immediate cash payment of the full benefit 
amount. 



Statutory Authority 
58-58-1; 58-58-110. 



G.S. 58-2-40; 58-3-150; 58-7-15; 



.1602 GENERAL REQUIREMENTS 

No insurer shall offer retained asset accounts as a mode of 
settlement of proceeds unless the insurer complies with the 
following: 

(1) The retained asset account shall be specifically 
identified as a settlement option within the terms 
of the policy in conjunction with other optional 
modes of settlement of proceeds. 

(2) The policy owner shall be provided the contractual 
right of selection from all available optional modes 
of settlement before death or death of the insured 
if the insured is not the policy owner. 

(3) After an insurer's offer, if a beneficiary selects a 
mode of settlement other than the immediate cash 
payment of the full benefit amount, the insurer 



shall provide the beneficiary with a supplemental 
contract that clearly discloses the rights and 
obligations of both the beneficiary and the insurer 
with respect to the mode of settlement selected. 



Statutory Authority 
58-58-1; 58-58-110. 



G.S. 58-2-40; 58-3-150; 58-7-15; 



.1603 DISCLOSURE REQUIREMENTS 

In conjunction with any offer of a retained asset account 
as a mode of settlement of proceeds, the insurer shall 
disclose the following, in writing, to any recipient of such 
an offer: 

m 



That the retained asset account is an option, not 
automatic or required, and that other settlement 
options are available under the policy. 

(2) Literature describing the settlement options shall 
clearly disclose what other options are available 
under the policy. Any interest rate being paid 
under other options shall be disclosed. 

(3) Whether the retained asset account is the equiva- 
lent of a checking or draft account. 

(4) An explanation of the account's features, includ- 
ing: 

(a) What banking services are provided to the 
account holder and by whom. 

(b) Which services are provided at no charge and 
which services involve a fee and the amount of 
the fee. 

(c) The nature and frequency of account statements. 

(d) A telephone number and address where the 
beneficiary can obtain additional information 
regarding the account. 

(e) Any minimum or maximum benefit payment 
requirements under the account. 

(f) The number of withdrawals within any time 
period shall be unlimited. 

(5) That payment of the total proceeds is accom- 
plished by delivery of a "checkbook kit" or "draft 
kit" to the beneficiary if that is the case. 

(6) TTiat one check or draft can be written to access 
the entire proceeds and that other settlement 
options are preserved until the entire balance is 
withdrawn or the balance drops below the in- 
surer's minimum payment requirements. 

(7) Any time delays the beneficiary should expect to 
encounter in completing any authorized transaction 
under a retained asset account and the anticipated 
amount of such time delay. 

(8) Whether the Federal Deposit Insurance Corpora- 
tion insures the retained asset account balance. 

(9) The insurer shall disclose that interest earned on 
the account may be taxable and the beneficiary 
should consult a tax advisor. 

(10) The insurer shall disclose the interest rate being 
paid under the retained asset account and the 
interest rate being paid under other settlement 



1782 



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November 15, 1995 10:16A 



PROPOSED RULES 



options. 

Statutory Authority - G.S. 58-2-40; 58-3-150; 58-58-1; 
58-58-110. 

.1604 ACCOUNTING 

Funds necessary to cover liabilities under retained asset 
accounts shall be reported on the annual statement as 
required by the Accounting Practices and Procedures 
Manual of the NAIC. 

Statutory Authority G.S. 58-2-40; 58-2-165; 58-58-1; 
58-58-110. 

SECTION .1700 - VIATIC AL SETTLEMENTS 

.1701 DEFINITIONS 

(&) The definitions in G.S. 58-58-42(a) are incorporated 
into this Section by reference. 

Cb) As used in this Section. "Division" means the Life 
and Health Division of the Department of Insurance. 

Statutory Authority G.S. 58-2-40; 58-58-42. 

.1702 VIATIC AL SETTLEMENT PROVIDERS 

(a) An application for provider registration shall be filed 
with the Division. 

(h) Only those individuals named in the application may 
act as providers. 

(c) A provider shall submit with the application a plan of 
operation, including full particulars on the manner in which 
the provider proposes to operate in North Carolina and the 
type or types of insurance policies or contracts it intends to 
viaticate. 

(d) The applicant's plan of operation shall be a narrative 
overview of the applicant's business and shall include the 
following information: 

(1) A certified copy of the applicant's charter and 
by-laws, if a corporation, and a copy of the 
partnership agreement, if a partnership. 

(2) A chart showing the relationship of the applicant 
to any parent, affiliated, or subsidiary corpora- 
tion. 

(3) A detailed description of the applicant's market- 
ing techniques, including a description of train- 
ing programs for those individuals who will have 
direct contact with viators. 

{4} A list of the names of applicant's directors and 
management personnel, including job title and a 
brief description of the job duties. 

(5) Financial statements, audited by an independent 

certified public accountant, for each of the three 
years immediately preceding the year of applica- 
tion or for that period, if shorter, during which 
the applicant was in existence. The financial 
statements shall disclose litigation expenses and 
costs incurred in processing viators' applica- 



tions. 

(6) A schedule listing the names of qualified finan- 
cial institutions with which the applicant has 
escrow trust agreements, indicating the balance 
on each account and copies of all escrow and 
trust agreements. 

(7) A detailed description of what steps through 
which the applicant will have access to funds, 
including the source that will make such funds 
available. 

(e) A provider shall immediately notify the Division of 
any change in the address of the provider and of any change 
in the officers and directors of the provider. 

(f) Each provider shall notify the Division of any change 
in the plan of operation or financial information filed with 
its application within 10 business days afster the change. 

(g) Each provider shall maintain net capital of at least one 
hundred thousand dollars ($100,000), or net capital plus a 
surety bond totalling at least one hundred thousand dollars 
($100,000). As used in this Rule, "net capital" means the 
excess of total assets over total liabilities as determined by 
generally accepted accounting principles. If any of a 
provider's assets have been depreciated, the amount of 
depreciation relative to any particular asset may be added to 
the depreciated cost of the assets to compute the total assets; 
provided however, that the amount resulting after adding 
such depreciation shall not exceed the fair market value of 
the asset. For the purpose of calculating the appropriate 
amount of the surety bond that is required by this Rule, net 
capital shall be presumed to be zero ($0.00) in situations in 
which a provider's liabilities exceed the provider's assets. 

(h) A pKjwer of attorney designating the Commissioner as 
the provider's agent for service of legal process shall be 
filed by every applicant. 

Statutory Authority G. S. 58-2-40; 58-16-30; 58-58-42. 

.1703 VIATIC AL SETTLEMENT BROKERS 

(a) No person shall act as a broker without first register- 
ing with the Agent Services Division. 

fb) The Commissioner shall suspend, revoke, or refuse to 
renew the registration of any broker if the Commissioner 
finds that: 

(1) There was any misrepresentation in the applica- 
tion for registration; 

(2) The broker has been found guilty of fraudulent 
or dishonest practices, has been found guilty of 
a felony or any misdemeanor of which criminal 
fraud is an element, or is otherwise shown to be 
financially irresponsible; or 

(3) TTie broker has placed or attempted to place a 
contract with an unregistered provider. 

(c) In the absence of a written agreement between a viator 
and a broker making the broker the viator's agent, a broker 
is presumed to be an agent of the provider. 

(d) A broker shall not, without the written agreement of 
the viator obtained before performing any services in 



10:16A 



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November 15, 1995 



1783 



PROPOSED RULES 



connection with a viatical settlement, seek or obtain any 
compensation from the viator. 

(e) A power of attorney designating the Commissioner as 
the broker's agent for service of legal process shall be filed 
by every applicant. 

Statutory Authority G.S. 58-2-40; 58-58-42. 

.1704 STANDARDS FOR EVALUATION OF REASONABLE PAYMENTS 

In order to assure that each viator receives a reasonable return for viaticating a policy, the following shall be minimum 
discounts: 



Insured's Life Expectancy 



Minimum Percentage 

of Face Value 

Less Outstanding Loans 

Received by Viator 



Less than 6 months 
At least 6 but less than 12 months 
At least 12 but less than 18 months 
At least 18 but less than 24 months 
Twenty-four months or more 

Statutory Authority G.S. 58-2-40; 58-58-420). 

.1705 REPORTING 

On March 1 of each year, each provider shall file with the 
Division a financial report, audited by an independent 
certified public accountant, for the previous calendar year. 
As part of the report, each provider shall file an experience 
exhibit in a form prescribed by the Commissioner. The 
information for the previous calendar year shall include: 
(1) For each policy viaticated; the 

(a) date the contract was entered into; 
(h) life expectancy of the viator on the date of the 
contract; 

face amount of the policy; 
amount paid by the provider under the contract: 
and 

date of death of the viator and the total insur- 
ance premiums paid by the provider to maintain 
the policy in force if the viator has died. 
A breakdown of applications received, accepted, 
and rejected, by disease category. 
A breakdown of policies viaticated by issuer and 
policy type. 

The number of secondary market vs. primary 
market transactions. 
The portfolio size. 
Tlie amount of outside borrowings. 



M 
M 



(2} 

(3) 

Ml 

(5) 
£6] 



Statutory Authority G.S. 58-2-40; 58-58-42(e). 

. 1 706 CONTRACTS AND PAYMENT OF PROCEEDS 

(a) Every viatical settlement contract to be used by a 
provider or broker shall be approved by the Commissioner 
before the marketing or solicitation of the contract. Two 



180 %1 

[70 %1 
[65 %1 
[60 %1 
[50 %1 



specimen copies of each contract, application, and informa- 
tion booklet shall be filed with the Division. 

(b) In addition to the requirements in G.S. 58-58-42. 
every contract shall include the following provisions: 

(1) That if the viator elects the right to rescind the 
contract, the provider's rights or interest in the 
policy will terminate immediately upon the 
viator giving notice of the rescission and tender- 
ing of the settlement proceeds together with any 
escrow interest received by the viator; provided, 
however, the provider's right or interest in the 
policy shall be limited to the amount of settle- 
ment proceeds actually received by the viator but 
not returned by the viator. 

(2) That if the viator dies before the end of the 
unconditional refund period, it shall be deemed 
that the viator rescinded the contract; 

(3) The amount of the fee or fees to be paid by the 
viator to the provider in conjunction with the 
contract shall be clearly stated, along with any 
conditions of payment or receipt of the fee or 
fees. 

(4) That the contract together with the application 
shall constitute the entire contract between the 
parties. 

£5} That, if the contract provides for the payment of 
an additional settlement amount to the viator 
upon the exercise of a guaranteed insurability 
option by the viator, the contract shall disclose 
the amount the additional settlement and the 
terms upon which it shall be payable. 

(6) If the policy to be viaticated provides a guaran- 



1784 



NORTH CAROLINA REGISTER 



November 15, 1995 



10:16A 



PROPOSED RULES 



teed insurability option, the option may only be 
exercised for the benefit of a person who has an 
insurable interest in the life to be insured. 

(c) Eyery application for a contract shall: 

(1) Set forth a notice in boldface and not less than 
10-point type to read as follows: 

"Receipt of payment under a viatical 
settlement may affect your eligibility for 
public assistance programs, such as 
medical assistance (Medicaid), aid to 
families with dependent children, sup- 
plementary social security income, and 
AIDS drug assistance programs; and it 
also may be taxable and subject to 
claims of your creditors. Before apply- 
ing for a viatical settlement, you should 
consult with the appropriate social 
services agency concerning how receipt 
could affect your eligibility and that of 
your spouse or dependents: and consult 
with a tax advisor."; 

(2) Contain the applicant's consent to the viatical 
settlement, an acknowledgment by the applicant 
that he or she has a catastrophic or 
life-threatening illness, and the applicant's 
representation that he or she has a full and 
complete understanding of the viatical settle- 
ment. 

(3) Contain a provision that the proposal that the 
provider will deliver to the applicant before the 
contract is signed will not include a detailed 
description of how the payment amount was 
determined unless the applicant specifically 
requests in the application the detailed descrip- 
tion, which description shall also include the 
assumed life expectancy of the viator. 

(4) Contain the applicant's representation that he or 
she has a full and complete understanding of the 
benefits of the policy; a release, in compliance 
with applicable statutory requirements, by the 
applicant of his or her medical records; and an 
acknowledgment that the applicant has entered 
into the contract freely and voluntarily. 

(5) Be duly witnessed and authorized by a person 
who does not have a financial or beneficial 
interest, directly or indirectly, in the contract or 
policy. 

(6) Provide for an acknowledgment of receipt of the 
information booklet. 

(d) With respect to a policy containing a provision for 
double or additional indemnity for accidental death, the 
additional payment shall remain payable to the beneficiary 
last named by the viator before the execution of the con- 
tract; to such other beneficiary, other than the provider, as 
the viator may thereafter designate; or in the absence of a 
designation, to the estate of the viator. 

(e) Payment of the proceeds under the contract shall be 



by means of wire transfer to the account of the viator or by 
certified check payable to the viator, and shall be made in 
a lump sum. Retention of a portion of the proceeds by the 
provider or escrow agent is not permissible. Installment 
payments shall not be made unless the provider has pur- 
chased an annuity or similar instrument issued by a licensed 
insurance company. 

Statutory Authority G.S. 58-2-40; 58-58-42. 

.1707 SOLICITATION 

(a) A provider or broker shall not discriminate in the 
solicitation or making of contracts on the basis of race, age, 
sex, natural origin, creed, religion, occupation, marital or 
family status or sexual orientation, or discriminate between 
viators with dependents and without. 

(b) A provider or broker shall not pay or offer to pay any 
finder's fee, commission, or other compensation to any 
viator's physician, attorney, accountant, or other person 
providing medical, legal, or financial planning services to 
the viator, or to any other person acting as an agent of the 
viator with respect to the viatical settlement. 

(c) Providers and brokers shall not solicit any investor 
who could influence the treatment of the illness of the viator 
whose coverage would be the subject of the investment. 

(d) Contacts for the purpose of determining the health 
status of a viator by a provider or broker after the contract 
has been signed shall be limited to once every three months 
for viators with a life expectancy of more than one year. 
and to no more than one per month for viators with a life 
expectancy of one year or less. The provider or broker shall 
explain the procedure for these contacts before the contract 
is executed. 

Statutory Authority G.S. 58-2-40; 58-58-42. 

.1708 ADVERTISING STANDARDS 

(a) All advertising material shall be filed simultaneously 
with the contract for which the advertisement is intended to 
solicit. All advertising material shall be in final form. The 
Commissioner shall accept a printer's proof with the written 
understanding that final printed material will be filed before 
use of the advertisement. Advertising material shall be 
submitted to the Division by the provider within 30 days 
before its intended use. 

(b) Advertising shall be truthful and not misleading by 
fact or implication. 

(c) If the advertiser emphasizes the speed with which 
viatication will occur, the advertising shall disclose the 
average time frame from completed application to the date 
of offer and from acceptance of the offer to receipt of the 
funds by a viator. 

(d) If the advertising emphasizes the dollar amounts 
available to viators, the advertising shall disclose the 
average purchase price as a percent of face value obtained 
by viators contracting with the advertiser during the past six 
months. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1785 



PROPOSED RULES 



Statutory Authority G.S. 58-2-40; 58-58-42; 58-63-15; 58- 
63-65. 

.1709 DISCLOSURE 

(a^ Every provider shall deliver an information booklet to 
every applicant. Delivery of the booklet shall be acknowl- 
edged by the applicant in the application form. The infor- 
mation booklet shall include the following; 

(1) How viatical settlements operate. 

(2) Possible alternatives to viatical settlements for 
persons with catastrophic or life-threatening 
illnesses, including accelerated death benefits 
offered by the issuer of the life insurance policy 
or certificate or loans secured by the life insur- 
ance policy or certificate. 

(3) Any tax consequences that may result from 
entering into a contract. 

(4) Any consequences of interruption or loss of 
assistance as provided by medical or public 
assistance programs. 

(5) The viator's right to rescind a contract. 

(6) The identity of any person who will receive any 
fee or compensation from the provider with 
respect to the contract and the amount and terms 
of such compensation. 

(7) The provider's complete name, main office 
address, and telephone number. 

fb) TTie provider shall disclose to the applicant, either on 
the application or through the information booklet, that the 
proceeds payable to the viator may not be exempt from the 
viator's creditors, personal representatives, trustees in 
bankruptcy and receivers in state and federal courts. 

(c) The provider shall disclose to each applicant, either on 
the application or through the information booklet, that the 
proceeds under a contract will be made in a lump sum. The 
disclosure shall state that the installment payments are not 
permissible unless the provider is a licensed insurance 
company or the provider has effected the purchase of an 
annuity or similar financial instrument issued by a licensed 
insurance company. 

(d) The provider shall disclose on the application or 
through the information booklet that medical, financial, or 
other personal information obtained from the viator will not 
be disclosed to any other person without the viator's specific 
written consent. 

(e) The provider shall disclose on the application or 
through the information booklet the procedures available 
concerning the payment of death benefit proceeds for any 
insured other than the \'iator or for the payment of acciden- 
tal death proceeds. 

(f) The provider, upon receipt of an application to 
viaticate and after determining the value to be offered in 
return for the assignment or transfer of the death benefit or 
ownership of a life insurance policy or certificate to the 
provider, shall deliver a proposal to the applicant before the 



m 



(2) 
(3) 
(4} 
(5) 

m 



Insurance contract death benefit in each of the 
next 10 years if the insurance contract is not 
viaticated. 



(A} 
IB) 

im 

ID} 



Amount of death benefit to be viaticated. 
Policy cash value before deducting any loan. 
Policy net cash value after deducting any loan. 
Policy death benefit less net cash value. 
Amount offered to applicant. 
Whether any supplemental benefit or benefits 
including the following benefits, will be contin- 
ued and, if so. the source of premium payment 
and the beneficiary of the proceeds of such 
supplemental benefit: 

Accidental death benefit. 

Disability income. 

Waiver of premium or of monthly deduction 

waiver. 



contract is to be signed. 
foUoN^ ing information: 



The proposal shall disclose the 



Guaranteed insurability options. 
Children or spouse coverage. 
(8) Name of the insurer; and whether the insurer 
does or does not have an accelerated death 
benefit program for which the applicant quali- 
fies, 
(g) The proposal shall include a notice stating that a 
detailed description of how the payment amount was 
determined, including interest rate, expense factors, and the 
assumed life expectancy used in the determination, may be 
obtained by a written request made to the provider. 

(h) Upon a written request by the applicant for a detailed 
description of how the payment amount was determined, the 
provider shall provide a detailed description stating the 
assumed life expectancy in months, the interest rate used to 
discount the amount at risk, the adjustments, if any, for 
future premiums, dividends and additional amounts, broker's 
compensation, and retention for other expenses, risk charge, 
and profit. 

(i) Every broker shall provide a written statement to 
every applicant before completion of any application to 
viaticate that describes how the broker will be compensated. 

Statutory Authority G. S. 58-2-40; 58-58-42. 

CHAPTER 17 - SENIORS' HEALTH INSURANCE 
INFORMATION PROGRAM 

.0006 BUYER'S GUIDES 

The Guide to Health Insurance for People with Medicare, 
as published by the National Association of Insurance 
Commissioners, and the Medicare Supplement Coimparison 
Guide, as published by SHTIP, or any successor publication. 
is publications, are available from SHIIP to consumers, free 
of charge. Licensed insurance agents and employees of 
insurance companies shall obtain this these publications from 
the insurance companies by which they are appointed or 
employed. 

Statutory Authority G.S. 58-2-40(1); 58-54-25; 58-55-30. 



1786 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to amend rule cited as 11 NCAC 17 .0003. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 10:00 a.m. on 
December 6, 1995 at the Dobbs Building, 3rd Floor Hearing 
Room, 430 N. Salisbury Street, Raleigh, NC 27611. 



Comment Procedures: Written comments and questions 
should be directed to Barbara Morales-Burke, NC Depart- 
ment of Insurance, 112 Cox Avenue, Raleigh, NC 27605, 
(919) 715-0194. Oral presentations may be made at the 
public hearing. 

Fiscal Note: These Rules do not affect the expenditures or 
revenues of local government or state funds. 

CHAPTER 12 - LIFE AND HEALTH DIVISION 



Reason for Proposed Action: Change of office location. 

Comment Procedures: Written comments and questions 
should be directed to Carla Suitt, 430 N. Salisbury Street, 
Raleigh, NC 27611. (919) 733-0111. Oral presentations 
may be made at the public hearing. 

Fiscal Note: This Rule does not affect the expenditures or 
revenues of state or local government finds. 

CHAPTER 17 - SENIORS' HEALTH INSURANCE 
INFORMATION PROGRAM 

.0003 LOCATION, MAILING ADDRESS, AND 
TELEPHONE 

(a) Tho primary looation of SHITP io 1600 Hill s borough 
Stroot. Ral e igh, North Carolina 37605. 

(a) ^ The mailing address of SHIIP is Post Office Box 
26387, Raleigh, North Carolina, 27611. 

(b) fe) TTie telephone numbers for SHIIP are toll-free 
1-800-443-9354 and 1-919-733-0111. 

Statutory Authority G.S. 58-2-5; 58-2-25; 58-2-40(1); 58-54- 
25; 58-55-30. 



SECTION .0900 - UTILIZATION REVIEW 

.0901 ORGANIZATIONAL STRUCTURE 

Each entity shall develop an organizational structure to 
conduct utilization review activities and provide adequate 
staff to conduct those activities in a timely and efficient 
manner. The structure shall provide for an identifiable 
party or parties charged with the responsibility of all 
utilization review activities and programs and the party or 
parties shall be professionally qualified to carry out that 
responsibility. 

Statutory Authority G.S. 58-2-40(1); 58-50-60. 

.0918 WRITTEN UTILIZATION REVIEW PLAN 

In addition to the items listed in 11 NCAC 12 .0905(1)). 
every utilization review plan shall contain: 

(1) The purpose, goals, and objectives of the utiliza- 
tion review program: 

£2} The role of the board of directors, clinical direc- 
tor, quality management personnel, and the clini- 
cal advisory panel: 

(3) Specific services to be monitored in accordance 
with 1 1 NCAC 12 .0903 and .0906. 



****************** 



Statutory Authority G.S. 58-2-40(1); 58-50-60. 



Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Insurance 
intends to adopt rules cited as 11 NCAC 12 .0901, .0918 - 
.0919; 11 NCAC 20 .0101, .0201 - .0205, .0301 - .0304, 
.0401 - .0410, .0501 - .0511, .0601 - .0602, .0701 - .0703; 
11 NCAC 21 .0101 - .0110. 

Proposed Effective Date: March 1, 1996, except for 11 
NCAC 20 .0701 - .0703 which is June 1. 1996. 

A Public Hearing will be conducted at 10:00 a.m. on 
December 18, 1995 at the Dobbs Building, 3rd Floor 
Hearing Room, 430 N. Salisbury Street, Raleigh, NC 27611. 

Reason for Proposed Action: Consumer protection and 
establish guidelines necessary to comply with statute provi- 
sions already in place. 



.0919 TELEPHONE ACCESSIBILITY STANDARDS 

Each entity shall develop standards for telephone accessi- 
bility, including call abandonment rate and average speed of 
answer. Each entity shall monitor adherence to or progress 
toward such goals on a periodic basis, but not less fre- 
quently than monthly. 

Statutory Authority G.S. 58-2-40(1); 58-50-60. 

CHAPTER 20 - MANAGED CARE HEALTH 
BENEFIT PLANS 

SECTION .0100 - MANAGED CARE DEFINITIONS 

.0101 DEFINITIONS 

As used in this Chapter: 

(1) "Accessibility of provider services" means the 

ability of a network plan carrier to deliver access 



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1787 



PROPOSED RULES 



to health care services to members in a manner 
that provides access to qualified preferred provid- 
ers on a timely basis as appropriate to medical 
necessity and affords additional administrative 
protection to members making use of such pre- 
ferred providers. 

(2) "Health care provider" or "provider" includes any 
person who, under G.S. 90 is licensed, registered. 
or certified to engage in the practice of or per- 
forms duties associated with any of the following: 
medicine, surgery, dentistry, pharmacy, optome- 
try, midwifery, osteopathy, podiatry, chiropractic, 
radiology, nursing, social work, physiotherapy, 
pathology, anesthesiology, anesthesia, laboratory 
analysis, rendering assistance to a physician, 
dental hygiene, psychiatry, psychology; or a 
health care facility as defined in G.S. 
131E-176(9b). 

(3) "Health maintenance organization" or "HMO" has 
the same meaning as in G.S. 58-67-5(f). 

(4) "Intermediary organization" or "intermediary" 
means any entity that employs or contracts with 
health care providers for the provision of health 
care services, and that also contracts with a 
network plan carrier or its intermediary. 

(5) "Member" means an individual who is covered by 
a network plan carrier. 

(6) "Network plan carrier" or "carrier" means an 
insurer, health maintenance organization, or any 
other entity that undertakes to provide reimburse- 
ment or provides or arranges to provide health 
care services and uses any incentives to encourage 
persons relying on the carrier for coverage or 
services to use health care providers belonging to 
the network used by the carrier. 

(7) "PPO" means a preferred provider organization or 
arrangement that is offered by a licensed insurance 
company, HMO, or hospital or medical service 
corporation, in which: there is no transfer of 
insurance risk to health care providers through 
capitated payment arrangements, fee withholds, 
bonuses, or other risk-sharing arrangements: 
health care services are provided by participating 
providers who are paid on negotiated or dis- 
counted fee-for-service bases; and either or both 
of the following features are present: 

(a) Utilization review and quality assurance pro- 
grams are used to manage the provision of 
covered services. 

(b) Enrollees are given incentives to Umit the receipt 
of covered services to those fumished by partici- 
pating providers. 

(8) "Preferred provider" has the same meaning as in 
G.S. 58-50-50 and 58-65-1. 

(9) "Quality management" means a program of re- 
views, studies, evaluations, and other activities 
employed by a Plan for the purpose of monitoring 



and enhancing quality of health care and services 
provided to members. 

(10) "Service area" means a geographic area in North 
Carolina approved by and on file with the Com- 
missioner in which: 

(a) An HMO enrolls persons who either work in the 

service area, reside in the service area, or work 

and reside in the service area, 
tb) An HMO contracts with or employs providers 

for the provision of health care services to its 

members. 

(11) "Service corporation" means a medical or hospital 
service corporation operating under G.S. 58, 
Article 65. 

(12) "Single ser^'ice HMO" means an organization that 
undertakes to provide or arrange for the delivery 
of a single type or single group of health care 
services to a defined population on a prepaid or 
capitated basis, except for an member's responsi- 
bility for non-covered services, coinsurance, 
copayments. or deductibles." 

(13) "Utilization review" means those methodologies 
used to improve the quality and maximize the 
efficiency of the health care delivery system 
through review of particular instances of care, 
including, whenever performed, precertification. 
concurrent review, discharge planning, and retro- 
spective review. 

Statutory Authority G.S. 58-2-40(1); 58-50-50; 58-50-55; 
58-65-1; 58-65-140; 58-67-150. 

SECTION .0200 - HEALTH CARE PROVmER 
CONTRACTS 

.0201 WRITTEN CONTRACTS 

(a) All contracts between network plan carriers and health 
care providers and health care network arrangements created 
by intermediar\' organizations used by network plan carriers 
for the provision of care on a preferred or in-network basis 
shall be in writing and shall comply with 11 NCAC 20 
.0202. 

(b) The form of every contract under Paragraph (a) of 
this Rule shall be filed with the Division before its execu- 
tion. 

(c) As used in this Section and in Section .0600 of this 
Chapter. "Division" means the Managed Care and Health 
Benefits Division of the Department of Insurance. 

Statutory Authority G.S. 58-2-40(1); 58-50-55; 58-65-25; 
58-65-140; 58-67-10; 58-67-20; 58-67-35; 58-67-150. 

.0202 CONTRACT PROVISIONS 

All contracts shall contain provisions addressing the 
following: 
(1) A statement that the contract and an 



attached 
amendments, exhibits, or appendices constitute the 



1788 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



£2} 



m 

(4} 
(5} 



M 
M 



£6} 



M 



m 

£al 



(b) 



(8) 



M 



£91 
(10) 



entire contract between the parties. 

Definitions of technical insurance or managed care (1 H 
terms utilized within the contract, which defmi- 
tions may reference other documents distributed to (a) 

providers and shall be consistent with definitions 
included in the evidence of coverage issued in (b) 

conjunction with the network plan. 
An indication of the term of the contract. 
Requirements for written notice of termination and (c) 

stipulation of each party's right to terminate. 
The provider's continuing obligations after termi- 
nation of the contract or in the case of the carrier (12) 
or intermediary's insolvency. TTie obligations 
shall address: 
Transition of administrative duties and records. 
Continuation of care, when inpatient care is on- 
going. Where the carrier, intermediary, or (13) 
provider accepts risk for the delivery of health 
care services, as opposed to reimbursement for 
services, inpatient care shall be continued until (14) 
the patient is ready for discharge or until the 
expiration of the contract period for which 
premiums have been paid, whichever is later. (15) 
The provider's credentials. 
TTie provider shall warrant that the provider has 
and will maintain licensure, accreditation, and 
credentials sufficient to meet the carrier's or (16) 
intermediary's credentialing program require- 
ments. 

The provider shall notify the carrier or interme- (17) 
diary of subsequent changes in status of any 
credentialing information. (a) 

The provider's professional liability insurance. 
The provider shall warrant that the provider has 
and will maintain malpractice insurance cover- (b) 

age. 

The provider shall notify the carrier or interme- 
diary of subsequent changes in status of mal- 
practice insurance on a timely basis. 
Member billing. 
In cases where the carrier, intermediary, or 
provider accepts risk for the delivery of health (18) 
care services, as opposed to reimbursement for 
services, the provider shall not bill any network 
plan member for covered services, except for 
specified coinsurance, copayments, and applica- 
ble deductibles. (19) 
The provider's responsibility to collect applica- 
ble member deductibles, copayments. coinsur- 
ance, and fees for noncovered services shall be 
specified. (20) 
The provider's obligation to arrange for appropri- 
ate coverage in accordance with the carrier's or 
intermediary's standards for provider accessibility. (21) 
The carrier's or intermediary's obligation to 
provide a mechanism that allows providers to 
verify member eligibility before rendering (22) 



healthcare services- 



Provider requirements regarding patients' records. 
The provider shall: 
Maintain confidentiality of enrollee medical and 
other health records as required by law. 
Maintain adequate medical and other health 
records according to industry and carrier or 
intermediary standards. 

Make such records available to the carrier, 
intermediary, and Division in conjunction with 
an examination of the carrier or intermediary. 
An agreement between the provider and carrier or 
intermediary that all professional decisions, judge- 
ments, treatments, diagnoses, and other profes- 
sional services delivered to plan members by the 
provider are the provider's sole responsibility. 
The provider's agreement to cooperate with 
member and carrier or intermediary in member 
grievance procedures. 

The provider's cooperation and participation with 
the carrier's coordination of benefits and third 
party recovery programs. 

A provision that the provider shall not discrimi- 
nate against members on the basis of race, color, 
national origin, gender, age, religion, marital 
status, health status, or health insurance coverage. 
A detailed explanation of the payment methodol- 
ogy, including disclosure of the units of service or 
services upon which payment is based. 
The carrier's or intermediary's obligations to 
provide data and information to the provider: 
To provide performance feedback reports or 
information to the provider on a regular basis, if 
compensation is related to efficiency criteria. 
To provide information on benefit plans: admin- 
istrative and utilization management require- 
ments; credentialing and recredentialing; quality 
assessment programs; and p rovider sanction 
policies. Timely notification of changes in such 
requirements shall also be provided by the 
carrier or intermediary. 
The provider's cooperation with and participation 
in the carrier's and intermediary's utilization 
management programs, credentialing and 
recredentialing programs, quality assessment 
programs, and provider sanctions programs. 
The carrier's or intermediary's obligation to 
include name, address, and telephone number of 
the provider or the provider group in the provider 
directory distributed to its members. 
TTie carrier's or intermediary's requirement to 
notify the provider of its current approved service 
area and subsequent changes in the service area. 
A description of the procedures to be followed to 
resolve differences between the carrier or interme- 
diary and the provider. 
The indemnification of the carrier or intermediary 



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November 15, 1995 



1789 



PROPOSED RULES 



(23) 
(24) 



Ibi 



aiid the provider for each other's actions. 

An independent contractor relationship between 

the provider and the carrier or the intermediary. 

Assignment of the contract: 
The provider's duties and obligations under the 
contract shall not be assigned, delegated, or 
transferred without the prior written consent of 
the carrier or intermediary. 
The carrier or intermediary shall notify the 
provider, in writing, of any duties or obligations 
that are to be delegated or transferred, before 
the delegation or transfer. 



Statutory' Authority G.S. 58-2-40(1); 58-2-131; 58-50-55; 
58-65-25; 58-65-105; 58-65-140; 58-67-10; 58-67-20; 58- 
67-35; 58-67-100; 58-67-150. 

.0203 CHANGES REQUIRING APPROVAL 

All material changes to an approved contract must be filed 
with the Division for approval before use. For the purpose 
of this Section, a "material change" includes a change in the 
method of payment, a change in the distribution of risk 
betvircen parties, a change in the clinical or administrative 
responsibilities delegated or a change to any provision 
required by 1 1 NCAC 20 .0202. 

Statutory- Authority G.S. 58-2-40(1); 58-50-55; 58-65-25; 
58-65-140; 58-67-10; 58-67-20; 58-67-35; 58-67-150. 

.0204 CARRIER AND EVTERMEDIARY 
CONTRACTS 

(a] If a carrier contracts with an intermediary, the carrier 
shall file uith the Di\ision for prior appro\al its contract 
with the intermediary. The filing shall be accompanied by 
a certification from the carrier that the intermediary will 
comp K' with all applicable statutory and regulatory require- 
ments applicable to the functions delegated with which the 
carrier must comply and that the carrier will monitor such 
compliance. 

(b) A carrier's contract with the intermediary shall state 
that: 

(1) All provider contracts used by the intermediary 

shall comply with 1 1 NCAC 20 .0202. 

(2") The net\^ork carrier retains its legal responsibil- 
ity to monitor and oversee the offering of ser- 
vices to its members and Financial responsibility 
to its members. 

(31 The intermediary may not subcontract for its 
services without the carrier's written permissio n. 

(4) The carrier may appro\e or disapprove partici- 
pation of individual pro\'iders contracting with 
the intermediary for inclusion in the carrier's 
own netuork plan. 

(5) The carrier shall retain copies or the intermedi- 
ary shall make a\ailable for re\iew by the 
division all provider contracts and subcontracts 
held by the intermediary. 



(6) If the intermediary organization assumes risk 
from the carrier or pays its providers on a risk 
basis or is responsible for claims payment to its 
providers: 

(A) The carrier shall receive documentation of 
utilization and claims payment on a regular 
basis and maintain appropriate accounting 
systems and records necessary to support the 
arrangement. 

(B) The carrier shall arrange for adequate Financial 
protection through such approaches as hold 
harmless language, retention of signatory 
control of the funds to be disbursed or Finan- 
cial reporting requirements. 

(C) The Division shall have access to the books, 
records. Financial information, and other 
information necessary to examine activities 
performed on behalf of the carrier to the extent 
provided by law. Such books and records 
shall be maintained in the State of North 
Carolina. 

Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-55; 
58-65-25; 58-65-105; 58-65-140; 58-67-10; 58-67-20; 58- 
67-35; 58-67-100; 58-67-150. 

.0205 FILING REQUIREMENTS 

(a) All contract filings shall be submitted to the Division 
in the following manner: 

(1) New contracts shall be submitted in triplicate 
and accompanied by a self-addressed, stamped 
envelope. 

(2) Amendments shall be submitted in redline for- 
mat, and accompanied by three copies of non- 
redlined format and a self-addressed, stamped 
envelope. 

(3) Each contract shall be designated by a unique 
form number assigned by the carrier or interme- 
diary for identJFication purposes. 

(4) Contract filings shall be held open for a 90 -day 
period beginning on the date that the Division 
notifies the filer of its disapproval of a contract- 
lb) During the 90-day period in Paragraph (a) of this 

Rule, the carrier or intermediary shall submit revised 
contracts that are responsive to each of the Division's 
reasons for disapproval of the initial Filing. 

(c) The Division shall close the File if the Filer fails to 
respond to the Division's disapproval letter within 90 days 
after the Division sends the letter. 

Statutory Authority G.S. 58-2-40(1); 58-50-55; 58-65-25; 
58-65-140; 58-67-10; 58-67-20; 58-67-35; 58-67-150. 

SECTION .0300 - PROVIDER ACCESSIBELITV ANT) 
AVAILABILITY 

.0301 PROVIDER AVAILABILITY STANDARDS 



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PROPOSED RULES 



(a) Each network plan carrier shall develop a methodol- 
ogy to determine the size and adequacy of the provider 
network necessary to serve the members. The methodology 
shall include all services covered by the benefit plan. The 
methodology standards shall include the following: 

(1) The number and type of primary care physicians 
and specialty care providers, as defined by the 
carrier. 

(2) A method to determine the addition of providers 
to the network as membership in the network 
plan carrier increases. 

(3) A method for obtaining health care services in 
another location when providers are not avail- 
able in the area. 

(b) Each carrier shall develop and utilize contracting 
criteria for tertiary care and acute care hospitals, psychiatric 
and substance abuse facilities and programs, skilled nursing 
facilities, and rehabilitation hospitals and programs, and any 
other contracted providers. 

Statutory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-65-140; 58-67-10(c)(14); 58-67-35; 58-67-150. 



Statutory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-65-140; 58-67-10(c)(14); 58-67-35; 58-67-150. 

.0304 MONITORING ACTIVITIES 

Each carrier shall regularly monitor compliance with this 
Section and evaluate its availability and accessibility on at 
least annually to ensure that the needs of its members are 
met. Supporting documentation of these activities shall be 
maintained for a period of three years or until the comple- 
tion of the next triennial examination, whichever is later. 

Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-55 (b); 
58-65-1; 58-65-25; 58-65-105; 58-65-140; 58-67- 10(c) (14); 
58-67-35; 58-67-100; 58-67-150. 

SECTION .0400 - PROVIDER CREDENTIALING 

.0401 CREDENTIALING PROGRAM 

In order to assure accessibility and availability of services, 
each intermediary or carrier shall establish a program that 
demonstrates that its preferred providers are appropriately 
credentialed in accordance with the intermediary's or 
carrier's credentialing requirements before the listing of 
those providers in the carrier's provider directory, hand- 



.0302 PROVIDER ACCESSIBILITY STANDARDS 

Each carrier shall establish minimum standards for books, or other marketing or member materials- 
provider accessibility to primary and specialty care physi- 
cian services and hospital based services. Carriers shall 
also establish appropriate similar standards for health care 
services provided by providers who are not physicians. 
Written policies and standards shall address the following: 
(1) The minimum driving distance or time a member 
must travel to obtain primary and specialty care 
services. 



(2) The minimum driving distance or time a member 
must travel to obtain hospital services. 

(3) The provision of 24-hour, seven day per week 
coverage by or for primary care services. 

(4) Emergency provisions within the service area. 

(5) Emergency provisions outside of the service area. 

(6) The waiting time for urgent and routine appoint- 
ments. 

(7) TTie waiting time in a provider's office. 

(8) The approval of and waiting time for appointments 
with consulting specialty physicians. 

Statutory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-65-140; 58-67-10(c)(14); 58-67-35; 58-67-150. 

.0303 PROVIDER NETWORK SAFEGUARDS 

In order to promote accessibility, each carrier and inter- 



mediary shall use the following as safeguards for their use 
of a contracted network of providers: 

(1) A provider credentialing program in accordance 
with 1 1 NCAC 20 .0400. 

(2) Written provider contracts in accordance with 1 1 
NCAC 20 .0200. 



Statutory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-65-140; 58-67- 10(c)( 14); 58-67-150. 

.0402 ORGANIZATION STRUCTURE 

Each intermediary or carrier shall develop an organization 
structure to conduct provider credentialing and provide 
adequate staff to credential and recredential all preferred 
providers. The structure shall provide for an identifiable 
person or persons responsible for all credentialing activities, 
which said person or persons shall be professionally quali- 
fied to carry out that responsibility. 

Statutory Authority G.S. 58-2-40(1); 58-50-55(h); 58-65-1; 
58-65-25; 58-65-140; 58-67- 10(c)( 14); 58-67-150. 

.0403 WRITTEN CREDENTIALING PLAN 

Each intermediary or carrier shall develop and adopt a 
written credentialing plan that contains a comprehensive set 
of policies and procedures to support the credentialing 
program. TTie plan shall include: 

(1) The purpose, goals, and objectives of the 
credentialing program. 

(2) The roles of those persons responsible for the 
credentialing program. 

Statutory Authority G.S. 58-2-40(1); 58-50-55(b); 58-65-1; 
58-65-25; 58-65-105; 58-65-140; 58-67-10(c)(14); 58-67- 
150. 

.0404 APPLICATION 

Each intermediary or carrier shall obtain and retain on file 



10:16A 



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November 15, 1995 



1791 



PROPOSED RULES 



a complete, signed, and dated credentialing application from 
each provider applying for participation in the plan network. 
The credentialing application shall include: 
(1) Personal information (e.g., name, address, tele- 

phone number). 
£2} Practice information, including call coverage. 
(3) Education and training history. 
£4} The current provider license, registration, or 
certification, and the names of other states where 
the applicant is or has been licensed, registered. 
or certified. 

(5) Drug Enforcement Agency (PEA) registration 
number and prescribing restrictions, if any. 

(6) Specialty board certification or eligibility, if 
applicable. 

(7) Professional and hospital affiliations. 

(8) The amount of professional liability coverage and 
any malpractice history. 

Any history of disciplinary actions by medical 
organizations and regulatory agencies. 
Any history of felony or misdemeanor convic- 
tions. 



(9] 
(10) 
Oil 



Any physical or mental impairments, including 
present or past substance abuse problems. 

(12) Professional references. 

(13) The type of affiliation requested (i.e.; primary 
care, consulting specialists, ambulatory care, etc.). 

(14) A statement of completeness, veracity, and release 
of information, signed and dated by the applicant. 



58-65-1; 58-65-25; 58-65-105; 58-65-140; 58-67-10(c)(14); 
58-67-100; 58-67-150. 

.0407 RECREDENTIALENG 

(a) Each intermediary or carrier shall recredential all 
preferred providers no less frequently than once every three 
years. 

(b) Each intermediary or carrier shall have a mechanism 
in place to reduce, suspend, or terminate the participation 
status of any preferred provider. 

Stamtory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-65-105; 58-65-140; 58-67- 10(c)(14); 58-67- 
150. 

.0408 CONFTOENTIALITY 

Each intermediary or carrier shall develop written policies 
and procedures to protect the confidentiality of patient health 
or medical record information and personal information, as 
provided by law. 

Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-55(b); 
58-65-1; 58-65-25; 58-65-105; 58-67-10(c)(14); 58-67-100. 



.0409 RECORDS AND EXANONATIONS 

Each intermediary or carrier shall maintain 



all 



credentialing records in a manner that the carrier deems to 
be adequate for a period of three years or until the comple- 
tion of the triennial examination, whichever is later. 



Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-55(hj; 
58-65-1; 58-65-25; 58-65-105; 58-65-140; 58-67-10(c)(14); 
58-67-100; 58-67-150. 



Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-55(b); 
58-65-1; 58-65-25; 58-65-105; 58-65-140; 58-67-10(c)(14); 
58-67-100; 58-67-150. 



.0405 VERIFICATION OF CREDENTIALS 

(a) Upon the receipt of credentialing application and all 
supporting documents, each intermediary or carrier shall 
verify all information provided in U. NCAC 20 .0404. 

(h) The carrier or intermediary shall verify the following 
information regarding facility credentials: 

( 1 ) Joint Commission on Accreditation of Healthcare 
Organizations' Certification. 

(2) State licensure. 

(3) Medicare and Medicaid certification. 

(4) Evidence of current malpractice insurance. 

Statutory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-65-105; 58-65-140; 58-67-10(c)(14); 58-67- 
150. 

.0406 PROVIDER FILES 

Each intermediary or carrier shall maintain, in centralized 
files, an individual file for each provider making application 
to affiliate with the intermediary or carrier. Each file shall 
include information in accordance with 1 1 NCAC 20 .0405. 



.0410 DELEGATION OF CREDENTIALING 
ACTIVITIES 

Whenever any intermediary or carrier delegates 
credentialing activities to a contracting entity, the intermedi- 
ary or carrier shall review and approve the contracting 
entity's credentialing program before contracting and shall 
continuously monitor the contracting entity's credentialing 
activities. The intermediary or carrier shall implement 
oversight mechanisms, including: 

( 1) Reviewing the contracting entity's credentialing 
plans, policies, procedures, forms, and adherence 
to verification procedures. 

(2) Requiring the contract entity to submit an updated 
list of providers no less frequently than quarterly. 

(3) Conducting an evaluation of the contracting 
entity's credentialing program no less frequently 
than every three years. 

Statutory Authority G.S. 58-2-40(1); 58-50-55 (b); 58-65-1; 
58-65-25; 58-67- 10(c)( 14); 58-67-150. 

SECTION .0500 - QUALITY MANAGEMENT 



Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-55(b); 



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PROPOSED RULES 



.0501 PROGRAM 

(a) Each HMO shall have a program for monitoring, 
evaluating, improving, and promoting the quality of health 
care and quality of services provided, which program shall 
address all areas and aspects of health care covered by the 
HMO's benefit plan or plans. 

(b) For full service HMOs, the program shall include 
hospital inpatient and outpatient care, including ancillary 
services; surgical services provided in inpatient and outpa- 
tient settings; ambulatory care, including care provided in 
participating physicians' offices; mental health and substance 
abuse treatment provided in inpatient, partial hospitalization, 
intensive outpatient, and outpatient settings; and allied health 
provider and home health services. 

(c) For single service HMOs, the program shall be 
commensurate with the type of care provided and shall 
include treatment plans, outpatient care in providers' offices, 
and inpatient and ambulatory care, if provided. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-20; 
58-67-150. 

.0502 STRUCTURE 

Each HMO shall develop an organizational structure to 
conduct quality management activities and programs and 
provide staff to conduct such activities in a timely and 
efficient manner. The structure shall provide for an 
identifiable person or persons responsible for all quality 
assurance activities, which person or persons shall be 
professionally qualified to carry out that responsibility. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-20; 
58-67-100; 58-67-150. 

.0503 PLAN 

Each HMO shall develop and adopt a written quality 
management plan that contains policies and procedures to 
support the quality management program. This plan shall 
include the following: 

(1) The purpose, goals, and objectives of the quality 
management program. 

(2) The role of those responsible for all quality assur- 
ance programs. 

(3) The specific services to be monitored in accor- 
dance with 11 NCAC 20 .0501. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-20; 
58-67-100; 58-67-150. 

.0504 ACTIVITIES 

(a) Each HMO shall develop a comprehensive set of 
quality of care and quality of service standards and establish 
a mechanism to determine if the standards are being met. 

£b} Each HMO shall employ a variety of quality manage- 
ment tools designed to assess and monitor the quality of care 
and quality of service in all treatment settings for all types 
of medical care provided. 



Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-20; 
58-67-150. 

.0505 QUALITY OF CARE COMPLAINTS 

Each HMO shall maintain policies and procedures to 
record, investigate, and take appropriate corrective action in 
response to patient complaints regarding the quality of care 
delivered by participating providers. The policies and 
procedures shall provide for the following: 

(1) Complaints about quality of care issues shall be 
forwarded to and investigated by qualified, clini- 
cally trained persons. 

(2) A method of aggregating, categorizing, and 
reporting quality of care complaints as a means of 
monitoring the number and types of complaints 
over time and identifying providers who may be 
persistent violators of quality standards. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-20; 
58-67-100; 58-67-150. 

.0506 DELEGATION OF ACTIVmES 

Whenever any HMO delegates quality management 
activities to another entity, the HMO shall review and 
approve the entity's quality management program before 
contracting with the entity and shall continuously monitor 
the entity's quality management activities. The HMO shall 
implement oversight mechanisms, including: 

(1) Reviewing the contracting entity's quality manage- 
ment plans, policies, procedures, and quality 
management activities and provider contracting 
forms; and verifying that they meet the HMO's 
standards. 

(2) Requiring the contracting entity to submit, at least 
annually, periodic reports of its quality manage- 
ment activities and operations. 

(3) Conducting periodic audits of the contracting 
entity's quality assurance activities and operations. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-150; 
58-67-150. 

.0507 CORRECTIVE ACTION 

Each HMO shall have procedures for identifying and 
taking corrective action on quality of care and quality of 
service problems, whether provider-specific or system-wide. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-150. 

.0508 CONFLICTS OF INTEREST 

Each HMO shall develop written policies and procedures 
about conflicts of interest. No person shall review health 
care that is provided if that person was directly responsible 
for providing that health care in or by an institution, 
organization, or agency in which that person or any member 
of his or her family has, directly or indirectly, a financial 
interest or has any other reason for prejudicial bias. That 



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person shall recuse himself or herself from such review. 
Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-150. 

.0509 CONFroENTIALITY 

Each HMO shall develop written policies and procedures 
to protect the confidentiality of medical record information 
and personal information, as those terms are defined in G.S. 
58-39-15. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-150. 

.0510 RECORDS AND EXAMINATIONS 

Each HMO shall maintain or cause to be maintained, in 
writing, records of quality management plans, procedures, 
activities, studies, operations, and other related information. 
The records shall be accessible to the Commissioner and 
shall be retained for a period of three years or until the 
completion of the next triennial examination, whichever is 
longer. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-100; 
58-67-150. 

.0511 INTERNAL AUDIT 

Each HMO shall periodically evaluate its quality manage- 
ment program to assure that it complies with North Carolina 
law and the HMO's internal standards, policies and proce- 
dures. The effectiveness and efficiency of the program shall 
also be evaluated. Tlie results of the evaluation shall be 
used in continuous improvement efforts. 

Statutory Authority G.S. 58-2-40(1); 58-67-10; 58-67-150. 

SECTION .0600 - SIGNIFICANT MODinCATIONS 
TO HMO OPERATIONS 

.0601 APPLICATION 

(a) All requests to expand an HMO's service area shall be 
submitted in writing as an application to the Division for 
review and approval. An HMO shall submit an original and 
seven copies of the application, which shall include the 
following information: 

( 1) A description of operational changes that will 
result from the expansion. 

(2) Financial and actuarial information as required 
bx ii NCAC lie .0311 and U NCAC 16 
.0605. 

(3) A description of provider interest and network 
development in the service area requested and 
information as to the HMO's existing provider 
network. 

£4} Copies of any form contracts to be made as a 
result of the expansion, including providers and 
subcontractors. 

(b) All changes in the product lines offered by an HMO 
shall be submitted in writing as an application to the 



m 

12} 



Division for review and approval. These changes include 
the addition of a point of service product: the addition of or 
changes to the HMO's existing health care delivery model, 
such as the addition of an IPA product or group model 
product or the addition of a gatekeeper product: and the 
addition of a single-service product, such as dental or vision 
plans. HMOs shall submit an original and seven copies of 
the application, which shall include the following informa- 
tion:_ 

A description of operational changes that will 

result from the expansion. 

Financial and actuarial information as required 

by ii NCAC lie .0311 and U. NCAC 16 

.0605. 

(3) A description of provider interest and network 
development in the service area requested and 
information as to the HMO's existing provider 
network. 

(4) Copies of form contracts to be made as a result 
of the expansion, including providers and sub- 
contractors. 

(c) All additions and deletions of subcontractors must be 
filed with the Division. 

(d) The addition of subcontractors shall be submitted in 
writing, along with copies of any contracts, to the Division 
for review and approval before the execution of any 
contract or subcontract. The contracts must be accompanied 
by a certification from the HMO that the subcontractor will 
comply with all applicable requirements for HMO opera- 
tions. 

(e) The deletion of a subcontractor shall be submitted in 
writing within 30 days after termination of the contract, 
unless termination is immediate, along with a plan to select 
another subcontractor or for the HMO to perform the once 
delegated functions in-house. 

(f) All health care provider and vendor contracts and 
changes shall be submitted to the Division for review and 
approval in accordance with 1 1 NCAC 20 .0200 before 
execution. 

(g) Each HMO shall submit written notice to the Division 
of its intent to engage in any arrangement through which 
that HMO owns or controls or manages any operations of 
another HMO in any other state, before entering into the 
arrangement. 

Statutory Authority G.S. 58-2-40; 58-67-10; 58-67-150. 

.0602 \\'RITTEN NOTICE 

In addition to those modifications set out in G.S. 58-67- 
10(d)(1), an HMO shall submit written notice to the Divi- 
sion of the following: 

( 1 ) Expansion of its provider network into counties 
outside its current service area. The notice shall 
be submitted before the execution of any provider 
contracts in these areas. 

(2) Changes to the members of the HMO's Board of 
Directors, Trustees. Officers, or any entity main- 



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taining at least 10 percent ownership in the HMO, 
within 15 days after the change. 

(3) Reductions in the number of providers that exceed 
10 percent of the total number of providers in a 
particular service area within 15 days after the 
change. 

(4} Any appUcation made in any other state for licen- 
sure as mi HMO, insurance company or any other 
type of managed care organization, within 15 days 
after making the application. 

(5) Any application made in North Carolina or any 
other state to engage in business arrangements 
involving Medicare. Medicaid. CHAMPUS or 
Workers Compensation, within 15 days after 
making the application. 

Statutory Authority G.S. 58-2-40; 58-67-10; 58-67-150. 

SECTION .0700 - PREFERRED PROVIDER 
ORGANIZATIONS 

.0701 ACCESSIBILrrY OF PROVIDERS 

(a) Each PPO shall establish provider accessibility and 
availability standards in compliance with 11 NCAC 20 
■0300. 

(b) Each PPO shall establish and maintain qualifications 
of its preferred providers through compliance with 11 
NCAC 20 .0400. 

(c) Each PPO shall provide to those health benefit plan 
members making use of its preferred provider network 
administrative protection via written provider contracts. 
Such contracts shall comply with 11 NCAC 20 .0200. 

Statutory Authority G.S. 58-2-40(1); 58-50-50; 58-50-55; 
58-65-1; 58-65-140. 

.0702 FINANCIAL SOLVENCY OF PPOs 

Financial solvency of a PPO shall be demonstrated by the 
following documentation: 

(1) Financial statements, which shall include a balance 
sheet, a statement of operations, and a statement 
of cash flows for the two most recent fiscal years. 
Financial statements shall be prepared by an 
Independent certified financial accountant. Finan- 
cial statements of a PPO's parent company are 
acceptable if they present consolidating schedules 
for the PPO and if the certified public accoun- 
tant's opinion letter does not disclaim association 
with the consolidating schedules. 

(2) Information about the PPO's system of internal 
controls, including a narrative discussing existing 
internal controls over company operations. The 
narrative shall address procedures to safeguard the 
receipt of company funds and the disbursement of 
company funds; and audits, including internal 
audits and those performed by companies with 
which the PPO has service agreements. 



Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-50; 
58-50-55; 58-65-1; 58-65-140. 

.0703 PPOs AS NETWORK PLAN CARRIERS 

Requirements for network plan carriers as provided in this 
Chapter shall not be applicable to PPOs before June L, 
1996. 

Statutory Authority G.S. 58-2-40(1); 58-2-131; 58-50-50; 
58-50-55; 58-65-1; 58-65-140. 

CHAPTER 21 - THIRD PARTY ADMINISTRATORS 

SECTION .0100 - APPLICATIONS FOR LICENSURE 

.0101 APPLICATION 

(a) In addition to those items listed in G.S. 58-56-51, the 
following items shall be filed in order to constitute a 
complete application for initial or renewal TPA licensure: 

£1} Transmittal form (TPATRN): 

(2) An application for administrator's license 
(TTAAPPl; 

(3) Biographical form(s) (TPABIO) completed by 
principal officers: 

£4} A narrative description specifying the TPA's 
services performed in North Carolina; 

(5) A power of attorney duly executed by the TPA. 
if not domiciled in North Carolina, appointing 
the Commissioner as attorney for the TPA in 
and for this State, upon whom process in any 
legal action or proceeding against the TPA on a 
cause of action arising in this State may be 
served; 

(6) Internal controls narrative (TPAICT); and 

(7) Administrator's questionnaire (TPAQSNy 

(b) Copies of all forms may be obtained from the Divi- 
sion. 

Statutory Authority G.S. 58-2-40; 58-56-51. 

.0102 FINANCIAL STATEMENTS 

The financial statements required by G.S. 58-56-5 l(b')(4) 
shall include a balance sheet, a statement of operations, and 
a statement of cash flows for the TPA's two most recent 
fiscal years. Financial statements shall be prepared by an 
independent certified public accountant. Financial state- 
ments of an TPA's parent company are acceptable if such 
present consolidating schedules for the TPA. and if the 
certified public accountant's opinion letter does not disclaim 
association with the consolidating schedules. 

Statutory Authority G.S. 58-2-40(b); 58-56-51. 

.0103 DETERMINATION OF FESfANCIAL 
RESPONSIBILITY 

In determining the financial responsibility of an applicant 
for a TPA license, the division shall require that an appli- 



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PROPOSED RULES 



cant be solvent. In addition, the division stiall consider: 

(1) Liquidity; 

(2) Any internal controls the applicant may have in 
place to afford protection for benefit plans, which 
may include the manner in which benefit plan fund 
accounts are established; and 

(3) Segregation of duties. 

Statutory Authority G.S. 58-2-40; 58-56-51. 

.0104 SERVICE CONTRACTS 

All administrative service agreements with insurance 
companies must be with insurers licensed to operate in 
North Carolina. 

Statutory Authority G.S. 58-2-40; 58-56-51. 

.0105 ADJUSTING CLAIMS BY ADMINISTRATORS 

No adjuster's license is required of employees of TPAs in 
adjusting claims for life or accident and health insurance, 
annuities, or self-funded health benefit plans. 

Statutory Authority G.S. 58-2-40; 58-56-51. 

.0106 PAYMENT OF CLAIMS 

If claims filed with a TPA or insurer are not paid within 
30 days after receipt of the initial claim by the TPA or the 
insurer, the TPA or the insurer shall at that time mail a 
claim status report to the claimant. 

Statutory Authority G.S. 58-2-40; 58-3-100; 58-56-31. 

.0107 GENERAL ADMINISTRATION 

Every TPA shall: 

(1) Establish a governing body that is authorized to 

set policy for the organization- 
Maintain complete corporate records in a secure 
and accessible location. 



£3) 



Hi 



Employ a management information system (MIS) 

that is able to provide information on aM major 

areas of the TPA operations. 

Set internal policies and procedures for contract 

management. 



Statutory Authority G.S. 58-2-40; 58-56-51. 

.0108 CLAIMS ADMINISTRATION 

(a) Each TPA's claims administration service shall be 
supported by a set of written policies, procedures, and 
performance standards related to timeliness and financial 
aspects of [ts operations. 

(b) Each TPA shall develop and implement a claims 
administration internal audit and quality assurance programs 
designed to monitor and improve claims processing services 
on a continuous basis. 

(c) Each insurer shall conduct internal on-site audits of its 
TPAs semi-annually. 



Statutory Authority G.S. 58-2-40; 58-56-31; 58-56-51. 

.0109 MARKETING AND SALES 

(a) Each TPA shall ensure that all direct sales staff and 
brokers are licensed by the State of North Carolina to sell 
health insurance and meet all continuing education require- 
ments. 

fb) Each TPA shall quote only insurance premium rates 
approved by the Department and shall not quote new 
premium rates before they are approved. 

Statutory Authority G.S. 58-2-40; 58-56-31; 58-56-51; 58- 
63-15. 

.0110 MEMBER SERVICES 

(a) Each TPA's member services department shall have 
a set of written policies and procedures to support its 
activities. 

(h) Each TPA's member services department shall be 
accessible to members by telephone. 

Statutory Authority G.S. 58-2-40; 58-56-51. 



TITLE 12 - DEPARTMENT OF JUSTICE 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the North Carolina Private Protective 
Services Board intends to amend rule cited as 12 NCAC 7D 
.0808. 

Temporary: This Rule was filed as a temporary amendment 
effective December 1, 1995 for a period of 180 days or until 
the permanent rule becomes effective, whichever is sooner. 

Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 2:00 p.m. on 
November 30, 1995 at the SBI Conference Room, Building 
12, 3320 Old Gamer Road, Raleigh, NC 27626. 

Reason for Proposed Action: The current rule prohibits 
the carry of concealed weapon. The rule will be in conflict 
with the newly adopted Concealed Weapons Act, G.S. 
14-415, which permits the carry of concealed weapons and 
which will become effective December 1 , 1995. 

Comment Procedures: Interested persons may present their 
views either orally or in writing at the hearing. The Record 
of Hearing will be open for receipt of written comments on 
the proposed text for 30 days after the text is published in 
the North Carolina Register or until the date of the public 
hearing, whichever is longer. Written comments must be 
delivered to the Private Protective Services Board, 3320 Old 
Gamer Road, Raleigh, NC 27626-0500. 

Fiscal Note: This Rule does not affect the expenditures or 



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revenues of local government or state funds. 

CHAPTER 7 - PRIVATE PROTECTIVE SERVICES 

SUBCHAPTER 7D - PRIVATE PROTECTIVE 
SERVICES BOARD 

SECTION .0800 - ARMED SECURITY GUARD 
FIREARM REGISTRATION PERMIT 

.0808 CONCEALED WEAPONS 

{a} Nothing in G.S. Chapter 74C or 12 NCAC 7D shall 
be construed as permitting the carrying of concealed 
weapons by licensees, trainees, registrants or firearms 
train e ro. trainers while in performance of duties regulated by 
the Private Protective Services Act, unless the licensee, 
trainer, or registrant has complied with all provisions of 
G.S. 14. Article 54B and applicable rules promulgated by 
the N.C. Criminal Justice Education and Training Standards 
Commission pursuant thereto and has been issued a current 
concealed handgun permit by a Sheriff. Additionally, 
applicants must comply with the concealed firearm provi- 
sions for training and qualifications set forth in \2 NCAC 
7D .OSOSfb) as well as other requirements which the Board 
and Attorney General deem necessary. 

(b) A licensee, trainer, or registrant must comply with 
each of the following requirements to carry a Concealed 
Firearm while engaged in a private protective services 
business. 

(1) An individual must hold a current Armed Secu- 
rity Guard Registration Permit by complying 
with all requirements for armed registration as 
prescribed in 12 NCAC 7D .0800. 

(2) An individual must complete any additional 
training a pproved by the Board and the Attorney 
General to comply with standards set forth by 
the N.C. Criminal Justice Education and Train- 
ing Standards Commission to include knowledge 
of North Carolina firearms laws including, but 
not limited to, the limitation on concealed 
weapon possession on specified grounds and 
within certain buildings. 

(3) An individual meeting the requirements of this 
Section may be issued a concealed firearm 
endorsement to the current Armed Security 
Guard Registration Permit for the term of the 
Armed Security Guard Registration Permit 
without additional permit fees, but any additional 
training costs necessary to comply with this 
section shall be borne directly by the applicant. 

(c) TTie endorsement may be renewed at the time of the 
Armed Security Guard Registration Permit renewal pursuant 
to the applicable provisions of 12 NCAC 7D .0800 on 
payment of the armed security guard registration renewal 
fee and proof of possession of a current Concealed Handgun 
Permit. There shall be no additional fee for the concealed 
firearms endorsement renewal. 



Statutory Authority G.S. 74C-5; 74C-13. 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the North Carolina Criminal Justice 
Education and Training Standards Commission intends to 
adopt rules cited as 12 NCAC 9F .0101 - .0107. 

Temporary: These Rules were filed as temporary adoptions 
effective November 1, 1995 for a period of 180 days or until 
the permanent rule becomes effective, whichever is sooner. 

Proposed Effective Date: May 1 , 1996. 

A Public Hearing will be conducted at 9:00 a.m. on 
February 22, 1996 at the Hearing Room of the Alcoholic 
Beverage Control Commission Building, 3322 Old Gamer 
Road, Raleigh, North Carolina. 

Reason for Proposed Action: The Commission has 
authorized rule-making authority to comply with G.S. 14-415 
in dealing with carrying concealed handguns. 

Comment Procedures: Any person interested in these Rules 
may present oral or written comments relevant to the 
proposed action at the Public Rule-Making Hearing. In 
addition, the record of the hearing will be open for receipt 
of written comments. Written comments not presented at the 
hearing should be received no later than the commencement 
of the hearing on February 22, 1996 and should be directed 
to David D. Cashwell. The proposed rules are available for 
public inspection and copies may be obtained at the follow- 
ing address: Criminal Justice Standards Division, P.O. 
Drawer 149, Raleigh, NC 27602 (Room 150, Court of 
Appeals Building, 1 West Morgan Street, Raleigh, NC). 

Fiscal Note: Tliese Rules do not affect the expenditures or 
revenues of local government or state funds. 

CHAPTER 9 - CRIMINAL JUSTICE EDUCATION 
AND TRAINING STANDARDS 

SUBCHAPTER 9F - CONCEALED HANDGUN 
TRAINING 

SECTION .0100 - CONCEALED HANDGUN 
TRAINING PROGRAM 

.0101 PURPOSE 

In order to ensure a minimum level of familiarization and 
proficiency in specific topical areas for citizens who 
lawfully carry handguns concealed, the Commission estab- 
lishes these general guidelines for the concealed handgun 
training program and the administration of the program. 

Statutory Authority G.S. 14-415.12; 14-415.13; 1995 S.L., 



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c. 507 s. 22. 

.0102 TOPICAL AREAS 

The following topical areas are hereby established as 
minimum general guidelines to be included in the concealed 
handgun training courses: 

(1) Legal Issues: TTie student will be able to demon- 
strate a general knowledge of North Carolina law 
on concealed handguns, handgun safety, and use 
of deadly force. The instructor should use the 
lesson plan and training videos produced by the 
North Carolina Justice Academy. TTie instructor 
shall determine the student's level of understand- 
ing of the relevant legal issues by examination. 

(2) Handgun Nomenclature: The students will be able 
to either verbally or in writing list the primary 
parts of their personal handgun. 

(3) Handgun Safety: The students will be able to: 
(a) list at least four rules of safe gun handling 

and demonstrate all of these procedures 
during range exercises; 
Cb) list four methods of safely storing the 

handgun and choose the method most ap- 
propriate for their personal use; 

(c) describe safety issues relating to the safe 
carry of a handgun; and 

(d) determine the proper storage of their 
weapon when there are minors in the home. 

(4) Handgun Fundamentals: The students will be able 
to: 

(a) demonstrate how to properly load the hand- 

guni 
£b) demonstrate how to properly unload the 

handgun; and 
(c) describe the operational characteristics of 

their handgun. 

(5) Marksmanship Fundamentals: TTie student will be 
able to: 

(a) demonstrate a proper handgun grip; 
(h) demonstrate either the Weaver or Isosceles 
Stance; 

(c) describe the elements of sight alignment 
and sight picture; and 

(d) demonstrate trigger control in a dry fire 
exercise. 

(6) Presentation Techniques: The students will be 
able to demonstrate the draw or presentation with 
their handgun. 

(7) Cleaning and Maintenance: The students will be 
able to: 

(a) demonstrate how to "field strip" the hand- 
gun if their weapon can be field stripped; 

(b) describe how to perform a "Function 
Check" on their personal weapon; and 

(c) based on the manufacturer's recommenda- 
tions, list the lubrication points of their 
specific handgun. 



(8) Ammunition: The students will be able to list the 
four components of handgun ammunition. 

(9) Proficiency Drills: The students will be able to: 

(a) demonstrate how to properly check the 
handgun in order to ensure that it is safe; 

(b) demonstrate how to fire the weapon from a 
ready position; 

(c) demonstrate how to fire weapon from the 
presentation; 

(d) demonstrate the ability to fire the handgun 
from various distances; and 

(e) successfully complete a proficiency test 
administered by the instructor. 

Statutory Authority G.S. 14-415.12. 

.0103 APPROVAL OF COURSES 

(a) An approved course is one that: 

(1) meets or exceeds the criteria as specified in 
Rule .0102 of this Section; 

(2) is certified or sponsored by one of the 
agencies listed in G.S. 14-415. 12(a)(4)(a). 
(b). and (c); and 

(3) is approved by the Commission. 

(b) The Commission shall review and ensure that submit- 
ted courses meet or exceed the general guidelines as 
specified in Rule .0102 of this Section. 

(c) Courses submitted for review must be submitted by 
the instructor who is to deliver the instruction by mailing the 
course to the Commission. 

(d) Any modification of an approved course must be 
submitted for approval and approved prior to the delivery of 
any such modified course and must be submitted by the 
instructor who is to deliver the instruction by mailing the 
course to the Commission. 

Statutory Authority G.S. 14-415.12. 

.0104 INSTRUCTOR QUALIFICATIONS 

In order to deliver an approved course: 

(1) the approved instructor shall hold "Specific In- 
structor Certification ; Firearms" issued by the 
Commission or hold "Firearms Instructor Certifi- 
cation" in Personal Protection. Basic Pistol, or 
Police Firearms issued by the National Rifle 
Association; and 

(2) the approved instructor shall hold a certificate 
issued by the North Carolina Justice Academy 
showing successful completion of the course on 
"Laws Governing Concealed Handgun and Use of 
Deadly Force. " 

Statutory Authority G.S. 14-415.12. 

.0105 INSTRUCTOR RESPONSIBILITIES 

In delivering an approved course, an approved instructor 
shall: 



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(1) File a copy of the proposed Firearms course de- 
scription, outline, and proof of instructor certiFica- 
tion along with a written request to conduct the 
carry concealed handgun course for approval by 
the Commission prior to delivery of any instruc- 
tion under G.S. 54B; 

£2} file a copy of any modification(s); 

(3) be issued a quantity of certificates as requested by 
the instructor for course participants which shall 
bear the instructor's name, the instructor's as- 
signed number, be sequentially numbered, and 
bear the raised seal by the Commission; 

£4} afFix the student's name to one certificate and 
issue that certiFicate to the student who success- 
fully completes the firearms safety training course; 

(5) conduct the training consistent with the general 
guidelines as established in 12 NCAC 9F .0102; 

(6) administer an examination to the student on the 

legal issues block of instruction to demonstrate Statutory Authority G.S. 14-415.12; 1995 S.L., c. 507 s. 22. 
that the student is knowledgeable in the laws of 

this State governing the carrying of a concealed ^^^^^^^^^^^"'^^^^^"^^^^^^^^^^^^^^^^^^"" 
handgun and the use of deadly force; and 

(7) administer a proficiency examination which shall 
demonstrate that the student is competent in the 
actual Firing and safe handling of a handgun. 



fifty dollars ($50.00) shall be submitted for the initial and 
annual filing of a course. If modification of the course 
occurs before the renewal filing date, a fee of twenty-five 
dollars ($25.00) shall be charged. 

(b) Instructors shall, in writing, request the number of 
certificates needed and shall remit a fee of one dollar 
($1.00) per certiFicate with a minimum request of 25 
certificates per instructor. Certificates may be obtained at 
the office of the agency: 

Criminal Justice Standards Division 

North Carolina Department of Justice 

1 West Morgan Street 

Court of A ppeals Building 

Post Office Drawer 149 

Raleigh, North Carolina 27602 

All such fees shall be paid by certified check made payable 

to the North Carolina Department of Justice. 



Statutory Authority G.S. 14-415.12; 14-415.13. 

.0106 SANCTIONS 

(a) The Commission shall suspend an approved course 
when the Commission finds that the course has failed to 
meet or maintain the required standards for approval. 

fb) The Commission shall deny or suspend the approval 
of instructor status when the Commission finds that the 
instructor: 

(1) has failed to meet or maintain the required 
standards for approval; 

(2) has failed to submit modification of courses 
or change in instructor status; 

(3) has submitted any non-sufficient funds check; 

(4) has falsified any successful completion of 
an approved course; or 

(5) has distributed, in any manner, any certifi- 
cate provided by the Commission without 
the named permittee undertaking the ap- 
proved course from that instructor. 

(c) Instructors who have lost their approved status subject 
to Subparagraph (b)(1), (2) or £3} of this Rule may reapply 
for approval upon documentation of compliance. 

Statutory Authority G.S. 14-415.12; 14-415.13. 

.0107 FILING AND FEES 

(a) Each instructor of an approved course shall file a copy 
of the firearms course description, outline, and proof of 
instructor certification annually, or upon modification of the 
course if more frequently, with the Commission. A fee of 



TITLE 13 - DEPARTMENT OF LABOR 

Notice is hereby given in accordance with G.S. 
150B-21.2 that the NC Department of Labor intends to 
adopt/amend rules governing safety and health committees 
in Mine and Quarry operations. Existing rules for the Mine 
and Quarry Division are codified as 13 NCAC 6. The 
agency will subsequently publish in the Register the text of 
the rule(s) it proposes to adopt as a result of the public 
hearing and of arty comments received on the subject matter. 

Proposed Effective Date: April 1, 1996. 

A Public Hearing will be conducted at 9:00 am on Decem- 
ber 15, 1995 at the NC Department of Labor, 319 
Chapanoke Road, Conference Room A, Raleigh, NC. 

Reason for Proposed Action: To determine what, if any, 
enabling regulations are required under Chapter 95, Article 
22 as applicable only to those individuals or entities covered 
by Chapter 74 Article 2A. 

Comment Procedures: Please submit your comments to 
Mr. Scott Templeton, APA Coordinator, NC Dept of Labor, 
4 W. Edenton Street, Raleigh, NC 27601, FAX (919) 715- 
5629; Telephone (919) 733-0368 by December 15, 1995. 
You may present written or oral comments at the hearing; 
time limits may be imposed by the Chair. 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1799 



PROPOSED RULES 



««**««««****«««*«« 



N 



otice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Labor intends to amend rule cited 
as 13 NCAC 7F .OWL 



Proposed Effective Date: April 1, J 996. 

A Public Hearing will be conducted at 2:00 pm on December 12, 1995 at the NC Department of Labor/OSHA Offices, 319 
Chapanoke Road, Suite 105, Raleigh, NC 27603-3432. 

Reason for Proposed Action: Update of exposure levels reflecting new research since 1971; proposed levels are consistent 
with levels proposed by federal OSHA. 

Comment Procedures: Persons wanting to present oral testimony at the hearing should provide a written summary of the 
proposed te.'nimony to the Department three business days prior to the hearing date. Written comments will be accepted until 
December 15, 1995. Direct all correspondence to Jill F. Cramer, NCDOUOSH, 319 Chapanoke Road, Suite 105, Raleigh, 
NC 27603-3432. 

Rscal Note: This Rule does not affect the expenditures or revenues of state or local government funds. 

CHAPTER 7 - OSHA 

SUBCHAPTER 7F - STA>fDARDS 

SECTION .0100 - GENERAL INDUSTRY STANDARDS 

.0101 GENERAL INDUSTRY 

(a) The provisions for the Occupational Safety and Health Standards for General Industry, Title 29 of the Code of Federal 
Regulations Part 1910, are incorporated by reference except as follows: 

(1) Subpart H - Hazardous Materials, 29 CFR 1910.120, Hazardous waste operations and emergency response, 
§1910. 120(q)(6) is amended by adding a new level of training: 

"(vi) First respwnder operations plus level. First responders at operations plus level are individuals who respond 
to hydrocarbon fuel tank leaks where the leaking tanks contain a hydrocarbon fuel which is used to propel the 
vehicle on which the tank is located. Only those vehicles designed for highway use or those used for industrial, 
agricultural or construction purposes are covered. First responders at the operations plus level shall have received 
at least training equal to first responder operations level and, in addition, shall receive training or have had sufficient 
experience to objectively demonstrate competency in the following areas and the employer shall so certify: 

(A) Know how to select and use proper specialized personal protective equipment provided to the first responder 
at operations plus level; 

(B) Understand basic hazardous materials terms as they pertain to hydrocarbon fuels; 

(C) Understand hazard and risk assessment techniques that pertain to gasoline, diesel fuel, propane and other 
hydrocarbon fuels; 

(D) Be able to pjerform control, containment, or confinement operations for gasoline, diesel fuel, propane and other 
hydrocarbon fuels within the capabilities of the available resources and personal protective equipment; and 

(E) Understand and know how to implement decontamination procedures for hydrocarbon fuels." 

(2) Subpart I — Personal Protective Equipment — 29 CFR 1910.132, General requirements, is amended at 29 CFR 
1910.132fb) to read: 

"(b) Equipment. (1) Employer-provided equipment. It is the responsibility of the employer to provide, at no 
cost to the employee, all personal protective equipment which the employee does not wear off the jobsite for use 
off the job. 

(2) Employee-owned equipment. Where employees provide their own protective equipment, the employer shall 
be responsible to assure its adequacy, including proper maintenance, and sanitation of such equipment." 

(3) Subpart R — Special Industries — incorporation by reference of final rule for 29 CFR 1910.269, Electric Power 
Generation, Transmission, and Distribution, including Appendices A through E, published in 59 ¥K (January 3 1 , 
1994) pages 4437 - 4475, all typographical and grammatical corrections to 1910.269 as published in 59 VR (June 
30, 1994) pages 33660 - 33664, and the amendment to 1910.269(g)(2)(i) as published in 59 FR (August 9, 1994) 
page 40729, except that 29 CFR 1910.269(g)(2)(v) is amended to read: 



1800 NORTH CAROLINA REGISTER November 15, 1995 10:16A 



PROPOSED RULES 



) 



"(v) Fall arrest equipment, work positioning equipment, or travel restricting equipment shall be used by employees 

working at elevated locations more than 4 feet (1.2 m) above the ground on poles, towers or similar structures 

if other fall protection has not been provided. A fall protection system as defined in 29 CFR 1926, Subpart 

M - Fall Protection, is required to be used by all employees when ascending, descending or changing locations 

on poles, towers or similar structures. However, the use of non-locking snap hooks with any fall protection 

system is prohibited as of July 1, 1995. Qualified employees may free climb wood poles if the employer can 

ensure (1) that the employee is able to comfortably and safely grip the pole with both hands while climbing, 

(2) that the pwle is free from attachments or any configurations of attachments that will materially impair the 

ability of a qualified employee to safely free climb the pole, (3) that the pole is otherwise free from 

impediments, contaminants or conditions of any type, including but not limited to ice, high winds or chemical 

treatments which materially impair the ability of a qualified employee to safely free climb the pole, and (4) that 

the employee is able to climb such structures without material physical impairments including over-exertion, 

lack of sleep or other physical stresses. " 

29 CFR 1910.269 as amended above is effective January 1, 1995, except that employers have until July 1, 1995, 

to implement the use of locking snap hooks, and employers have until January 1 , 1996, to design and implement 

a system of fall protection for use by employees while ascending, descending or changing locations on towers. 

Also, 29 CFR 1910.269(a)(2) Training is effective January 31, 1995, and 29 CFR 1910.269(v)(ll)(xii) is 

effective February 1, 1996. 

(4) Subpart Z — Toxic and Hazardous Substances: 

(A) 29 CFR 1910.1000 Air Contaminants: 

Revision of 1910. 1000 (a) and (f), removal of Table Z-2 and Table Z-3 and re-adoption Ro adoption of revised 
permissible exposure limits as Table Z-1 as originally published in 54 FR (January 19, 1989) pages 2196 3533 
and pag e o 266 8 2695 2923 ; 2958 as follows: 
" §1910.1000 Air contaminants. 

An employee's exposure to any substance listed in Table Z-1 of this Rule shall be limited in accordance with the 
requirements of the following paragraphs and sections. 

(a) Table Z-1. (I) Substances with limits Jesisnated hy_ "C" ; Ceilins Limits. An employee's exposure to any 
substance in Table Z-1, the exposure limit of which is followed by a "C", shall at no time exceed the exposure limit 
given for that substance in Table Z-1. 

(2) Current permissible exposure limits. An employee's exposure to any substance listed in Table Z-1 shall 
not exceed the Time Weighted Average (TWA), Short Term Exposure Limit (STEL) and Ceiling Limit 
specified for that substance in Table Z-1 under the Current PEL column. 

(3) Skin Desienation. To prevent or reduce skin absorption, an employee's skin exposure to substances 
listed in Table Z-1 with an "X" in the Skin Designation column following the substance name shall be 
prevented or reduced to the extent necessary in the circumstances through the use of gloves, coveralls, 
goggles, or other appropriate personal protective equipment, engineering controls or work practices. 

(4) Definitions. The following definitions are applicable to the Current PEL column of Table Z-1: 

(i) Time weighted average (TWA) is the employee's average airborne ex posure in any 8-hour 

work shift of a 40-hour work week which shall not be exceeded. 

(ii) Short term exposure limit (STEL) is the employee's 15-minute time weighted average 

exposure which shall not be exceeded at any time during a work day unless another time limit is 

specified in a parenthetical notation below the limit. If another time period is specified, the time 

weighted average exposure over that time period shall not be exceed at any time during the 

working day. 

(iii) Ceiling is the employee's exposure which shall not be exceeded during any part of the work 

day. If instantaneous monitoring is not feasible, then the ceiling shall be assessed as a 15-minute 

time weighted average exposure which shall not be exceeded at any time over a working day. 

(5) Additional Definition. The terms "substance." "air contaminant." and "material" are equivalent in 
meaning for 29 CFR 1910.1000. 

(h) and (c) are reserved^ 
(d) and (e) are not amended. 

(Q Effective dates. (1) The effective date for the permissible exposure limits specified in the following Current PEL 
column of Table Z-1 is April l^ 1996. 

LIMITS FOR AIR CONTAMINANTS 

NOTE: Because of the length of the table, explanatory Footnotes applicable to aU substances are given below. 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1801 



PROPOSED RULES 



Footnote (1) The PELs are 8 -hour TWAs unless otherwise noted; a {C} designation denotes a ceiling limit. They are to be 
determined from breathing-zone air samples. 

Footnote (2) Parts of vapor or gas ger million parts of contaminated air by volume at 25 degrees C and 760 torr. 
Footnote (3) Milligrams of substance per cubic meter of air. VVIien entrs' is in this column only, the value is exact: when 
listed with a ppm entry, it is approximate. 

Footnote (4) The CAS number is for information only. Enforcement is based on the substance name. 
Footnote (5) Regarding St^'rene Only: OSHNC recognizes that the permissible exposure limits for styrene may not be 
achievable solely through engineering and work practice controls for boat-building and operations comparable to boat 
building. Comparable operations are those that (1) employ the manual la\-up and sprasaip process. (2) the manufactured items 
that utilize the same equipment and technology as that found in boat building, and (3) the same considerations of large part 
size, configuration interfering with air-flow control techniques, and resin usage apply. Examples of operations comparable 
to boat building would include the manufacture of large abo\'e-ground or below-ground storage tanks, large parts for 
recreational vehicles, and large duct work. Because U is impossible to define in advance every manual la\Tjp and sprayup 
process for uhich compliance may not be feasible solely through engineering and work practice controls, some guidelines 
concerning part size and configuration issues are necessary. The primary question for manual la\"up and sprayup operations 
is u'hether the part's size and configuration interfere with normal air-flow techniques. For operations making parts (such 
as tubs and vanities) that do not meet the guidelines described, beginning April 1^ 1996, the hierarchy of controls specified 
in 29 CFR 1910.1000(e) will apply to reduce styrene exposures to the new 50 ppm TWA and 100 ppm STEL. In 
consequence, the burden of proof will be on the emplo>er to show that engineering and work practice controls are not 
feasible for specific operations. However, with respect to boat-building operations the burden of proof would be on OSHNC 
to prove that the level could be attained solely through engineering and work practice controls. 
Footnote (6) Regarding Carbon Dioxide only: no change was made to the PEL. 
Footnote (7) Regarding Subtilisins only: this substance is not included [n Table Z-1 below. 



TABLE Z - L - LIMFTS FOR AIR CONTAMINANTS 



Substance 



1 
1 

1 

I 



CAS No. (c 



Acetaldehyde I 

1 

Acetic acid I 

Acetic anhydride I 

Acetone [ 

I 

Acetonitrile I 

2-Acetvlaminof luorene; J_ 
see 1910. 1014 I 

Acetylene dichloride; J_ 
see J_ 

1 , 2-Dichloroethylene ■ I 

Acetylene tetrabromide . I 

Acetyl salicylic acid J_ 
(Aspirin) I 

Acrolein I 

1 

Acrylamide I 

Acrylic acid | 

Acrylonitrile; J_ 

see 1910. 1045 I 

Aldrin I 

Allyl alcohol I 

1 

Allyl chloride [ 

I 

Allyl qlycidyl ether. . . I 

(AGE) ■ ■ 



75-07-0 



64-19-7 

108-24-7 

67-64-1 



75-05-8 



53-96-3 



79- 


-27- 


- 6 


50- 


-78- 


-2 


107- 


-02- 


-8 


79- 


-06- 


-1 


79- 


-10- 


-7 


107- 


-13- 


-1 


309- 


-00- 


-2 


107- 


-18- 


-6 


107- 


-05- 


-1 


106- 


-92- 


-3 



1 

1 FORMER 
U PEL 
J 

1 

1 200 ppm TWA 

1 

1 10 ppm TWA 

1 5 ppm TVfA 

I 1000 ppm TVfA 

1 

1 £0 ppm T>7A 
I 

1 ' 

1 

1 

1 

1 

1 1 ppm TWA 

1 

1 

10.1 ppm T^-JA 

1 

! 0. 3 mg/m^ TWA 

1 

1 
1 

I .25 mg/m'TWA 
1 2 ppm TWA 

1 

1 1 ppm TV7A 

1 

1 

1 10 EEm (C) 



1 CURRENT 
1 PEL 



1 

1 100 
1 15^ 
1 10 
1 5 
1 750 
I 1000 



ppm TWA 
ppm STEL 
ppm TWA 
ppm (Ceiling) 



40 
60 



ppm Tt'7A 

ppm STEL 

ppm TWA 

ppm STEL 



5 

0. 
0. 

0^ 
10 



ppm TWA 

mg/m^ TVfA 
J^ ppm TX'fA 
._2_ ppm STEL 
03 mg/m^ 

ppm TWA 



. 25 mg/m^ TWA 
ppm TWA 
ppm STEL 
ppm TI'fA 
ppm STEL 



1 

1 


Skin 
desig- 


1 


nation 


1 





1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 
i X 

1 
1 
1 
1 



X 
X 



5 ppm T\'JA 



1802 



NORTH CAROLINA REGISTER 



November 15, 1995 I0:16A 



PROPOSED RULES 



1 

Allvl propyl disulfide. I 2179-59-1 

1 
alpha-Alumina I 1344-28-1 

Total dust I 

Respirable fraction . . I 
Aluminum (as Al ) I 7429-90-5 

Metal 1 

Total dust I 

Respirable fraction. I 

Pvropowders I 

Welding fumes I 

Alkvls I 7429-90-5 

Aluminum (soluble salts) I 7429-90-5 
4-Amj-nodiphenvl; J. 

see 1910. 1011 I 92-67-1 

2-Aminoethanol ; X 

see Ethanolamine I 

2-Aminopvridine I 504-29-0 

Amitrole I 61-82-5 

Ammonia I 7664-41-7 

Ammonium chloride fume _L 12125-02-9 

1 
Ammonium sul f amate I 7773-06-0 

Total dust I 

Respirable fraction. . I 

n-Amvl acetate I 628-63-7 

sec-Amyl acetate I 626-38-0 

Aniline and homologs ... I 62-53-3 
Anisidine X 

(0-, p-isomers) I 29191-52-4 

Antimony and compounds X 

(as Sb) I 7440-36-0 

ANTU (alpha X 

Naphthylthiourea) .... I 86-88-4 
Arsenic, inorganic X 

compounds ( as As ) ; X 

see 1910. 1018 I 7440-38-2 

Arsenic , organic X 

compounds (as As ) .... I 7440-38-2 

Arsine I 7784-42-1 

Asbestos; X 

see 1910. 1001 I (4) 

Atrazine I 1912-24-9 

Azinphos-methyl I 86-50-0 

Barium, soluble X 

compounds (as Ba) . . . . I 7440-39-3 
Barium sulfate I 7727-43-7 

Total dust I 

Respirable fraction . . I 
Benomvl I 17804-35-2 

Total dust I 

Respirable fraction. . I 
Benzene; See 1910. 1028. I 71-43-2 

See Table Z-2 for X 
the limits X 

applicable in the X 
operations or X 
sectors excluded X 
in 1910. 1028 (d) X 
Benzidine; X 

See 1910. 1010 I 92-87-5 

p- Ben zoqui none; X 

see Quinone . X 



1 




1 


10 


ppm STEL 


1 


1 2 ppm 


TWA 


X 


2 


ppm TWA 


1 


1 




X 


3 


ppm STEL 


1 


1 




1 






X 


1 15 mg/m^ 




1 


10 


mg/m' TWA 


1 


1 5 mg/m^ 




X 


5 


mg/m' TWA 


X 


1 




1 






1 


1 




1 






1 


1 15 mq/m 




1 


15 


mg/m' TWA 


1 


1 5 mg/m 




1 


5 


mg/m' TWA 


X 


1 




X 


5 


mq/m' TWA 


1 


1 




1 


5 


mq/m' TWA 


1 


1 




X 


2 


mq/m' TWA 


X 


1 




1 


2 


mq/m' TWA 


1 


1 




1 






X 


1 




1 






1 


X 




1 






i 


1 




X 






1 


10.5 mg/m 


' TWAI 


0_ 


5 mq/m' TWA 


1 


1 




J. 





2 mq/m' TWA 


X 


1 5 ppm 


TWA 


X 


35 


ppm STEL 


1 


1 


_:. 


1 


10 


mq/m' TWA 


1 


X 




1 


20 


mq/m' STEL 


X 


1 




1 






1 


1 15 mg/m' 


TWA 


X 


10 


mq/m' TWA 


X 


1 5 mg/m' 


TWA 


1 


5 


mq/m' TWA 


1 


1 100 ppm 


TWA 


1 


100 


ppm TWA 


1 


1 125 ppm 


TWA 


1 


125 


ppm TWA 


1 


1 5 ppm 


TWA 


X 


2 


ppm TWA 


X 


X 




X 






X 


10.5 mg/m 


TWAI 


0_ 


5 mq/m' TWA 


1 


1 




X 






X 


10.5 mq/m 


TWAI 





5 mq/m' TWA 


1 


X 




1 






X 


10.3 mq/m 


TWAI 





3 mq/m' TWA 


1 


X 




1 






1 


1 




1 






1 


1 




1 






1 


X 




1 






1 


10.5 mq/m- 


TWAI 


0.5 mg/m' TWA 


1 


1 0. 05 mg/m'TWAI 


0.0 5 ppm TWA 


1 


X 




1 






X 


1 




1 






1 


1 




1 


5 mg/m' TWA 


X 


10.2 mg/m 


TWAI 


0.2 mg/m' TWA 


1 


1 




X 






1 


10.5 mq/m 


TWAI 


0.5 mg/m' TWA 


1 


1 




X 






i 


1 15 mq/m' 


TWA 


X 


10 mg/m' TWA 


.L 


1 5 mq/m' 


TWA 


1 


5 mg/m' TWA 


X 


X 




1 






1 


1 15 mq/m' 


TWA 


1 


10 mg/m' TWA 


1 


1 5 mq/m' 


TWA 


1 


c 


) mq/m' TWA 


X 


1 




X 






1 


1 




1 






X 


1 




1 






± 


1 




1 






± 


1 




1 






1 


X 




1 






1 


1 




1 






1 


X 




1 






1 


X 




1 






1 


X 




1 






1 


1 




1 






1 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1803 



PROPOSED RULES 



Benzo (a) pvrene; see J_ 

Coal tar pitch J_ 

volatiles I 

Benzoyl peroxide I 94-36-0 

Benzyl chloride I 100-44-7 

Beryllium and ]_ 

beryllium compounds J_ 7440-41-7 

(as Be) I 

1 
Biphenyl; see Diphenyl . I 
Bismuth telluride, 1 

Undoped I 1304-82-1 

Total dust I 

Respirable fraction . . I 
Bismuth telluride, J_ 

Se-doped I 

Borates, tetra, (anhvdr) I 1330-43-4 
Borates, tetra (decahyd) I 1303-96-4 
Borates, tetra (pentahv) I 12179-04-3 
Boron oxide I 1303-86-2 

Total dust I 

Respirable fraction . . . I 

Boron tribromide I 10294-33-4 

Boron trif luoride I 7637-07-2 

Bromacil I 314-40-9 

Bromine I 7726-95-6 

1 

Bromine pentaf luoride . . I 778 9-30-2 

Bromoform I 75-25-2 

Butadiene J_ 

(1, 3-Butadiene) I 106-99-0 

Butane I 106-97-8 

Butanethiol ; J_ 

see Butyl mercaptan . J_ 
2-Butanone _L 

(Methyl ethyl ketone) I 78-93-3 

1 

2-Butoxyethanol I 111-76-2 

n-Butyl-acetate I 123-86-4 

1 

sec-Butyl acetate I 105-46-4 

tert-Butyl-acetate i 540-88-5 

n-Butyl acrylate I 141-32-2 

n-Butyl alcohol I 71-36-3 

sec-Butyl alcohol I 78-92-2 

tert-Butyl alcohol I 75-65-0 

1 

Butylamine I 109-73-9 

tert-Butyl chromate J_ 

(as CrO(3) ) I 1189-85-1 

n-Butyl qlycidyl ether ]_ 

(BGE) I 2426-08-6 

n-Butyl lactate 1 138-2 

n-Butyl mercaptan 1 109-79- 

Butyl mercaptan [ 109-79-5 

o-sec-Butylphenol I 89-72-5 

p-tert-Butvltoluene. . . . I 98-51-1 

1 

Cadmium ( as Cd) ; J_ 

see 1910. 1027 | 7440-43-9 

Calcium Carbonate I 1317-65-3 

Total dust I 

Respirable fraction . . I 
Calcium cyanamide I 156-62-7 



1 1 

1 1 

1 i 

1 5 mq/m^ TWA 1 

1 5 mq/m^ TWA 1 

1 1 

1 Table Z-2 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 15 mq/m^ TWA I 

1 5 mq/m' TWA I 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

I 15 mq/m^ TWA 1 
1 5 mq/m^ TWA 1 

1 1 

I 1 ppm TWA(C) 1 

1 1 

1 0. 1 ppm TWA 1 

1 1 

1 1 

1 0. 5 ppm TWA 1 

1 1 

I 1000 ppm TWA I 1 

1 1 . 

1 1 

1 i 

i 1 

1 200 ppm TWA 1 

1 1 . 

1 50 ppm TWA 1 
1 150 ppm TWA 1 

1 1 . 

1 200 ppm TWA 1 
1 200 ppm TWA 1 

1 1 ■ 

I 100 ppm TWA 1 
I 150 ppm TWA 1 
I 100 ppm TWA 1 

1 1 ; 

1 b ppm (C) 1 

1 1 

10.1 mq/m' (C) 1 

1 1 

1 5^ ppm TWA 1 

21 1 

5_L iO ppm TWA 1 

1 10 ppm TWA 1 

1 1 

1 iO ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

I 15 mq/m^ TWA 1 
1 5 mq/m-^ TWA 1 
1 1 





1 




1 




1 


5 mq/m' TWA 


1 


5 mq/m^ TWA 


i 




1 


0. 02 ppm TWA 


1 


0. 005 ppm STEL 


1 


0.025 ppm (c) 


1 




1 




1 




1 


15 mq/m^ TWA 


1 


5 mq/m' TWA 


1 




1 


5 mq/m' TWA 


1 


10 mq/m^ TWA 


1 


10 mq/m' TWA 


1 


10 mq/mi^ TWA 


1 




1 


10 mq/m^ TWA 


1 


5 mq/m^ TWA 


1 


1 ppm (C) 


1 


1 ppm (C) 


1 


1 ppm TWA 


1 


. 1 ppm TWA 


1 


0. 3 ppm STEL 


1 


. 1 ppm TWA 


1 


. 5 ppm TWA 


1 X 




1 


000 ppm TWA 


1 


8 00 ppm TWA 


1 




1 




i 




1 


2 00 ppm TWA 


1 


300 ppm STEL 


1 


2 5 ppm TWA 


1 X 


150 ppm TWA 


i 


200 ppm STEL 


1 


200 ppm TWA 


1 


200 ppm TWA 


1 


10 ppm TWA 


i 


5 ppm (C) 


1 X 


100 ppm TWA 


1 


100 ppm TWA 


1 


150 ppm STEL 


1 


5 ppm (C) 


1 X 




1 


0.1 m>q/mMC) 


1 X 




1 


2 5 ppm TWA 


1 


5 ppm TV/A 


1 


. 5 ppm TWA 


1 


. 5 ppm TWA 


1 


5 ppm TWA 


1 X 


10 ppm TWA 


1 


20 ppm STEL 


1 




1 




1 




1 


15 mq/m' TWA 


1 


5 mq/m^ TWA 


1 


0. 5 mq/m-' TWA 


1 



1804 



NORTH CAROLINA REGISTER 



November 15, 1995 10:I6A 



PROPOSED RULES 



Calcium hydroxide . 



Calcium oxide . 



Calcium silicate . 



Total dust. 



Respirable fraction- 



Calcium sulfate ■ 



Total dust ■ 



Respirable fraction . 



Camphor, synthetic . 



Caprolactam (dust) 



i 



Caprolactam (vapor) 



1 



Captafol (Dif platan) 



Captan J_ 

Carbaryl (Sevin) 

Carbofuran 



Carbon black . 



Carbon dioxide . 



Carbon disulfide . 



Carbon monoxide. 



Carbon tetrabromide . . . 



1 



Carbon tetrachloride . 



Carbonyl fluoride . 



Catechol ( Pyrocatechol ) 
Cellulose 

Total dust 



Respirable fraction . 



Cesium hydroxide . 
Chlordane 



Chlorinated camphene . . . 



1 

Chlorinated diphenyl J_ 
oxide 



Chlorine . 



Chlorine dioxide . 



Chlorine trifluoride. 



Chloroacetaldehyde . 



g-Chloroacetophenone 
( Phenacyl chloride) . 



Chloroacetyl chloride . . 
Chlorobenzene 



o- Chi orobenzyli dene J_ 
malononitrile 



Chlorobromomethane . 



2-Chloro-l, 3-butadiene; 



See beta-Chloroprene . 



Chlorodif 1 UP rome thane . 



Chlorodiphenvl J_ 

(42% Chlorine) (PCB) . 



Chlorodiphenyl 

(54% Chlorine) (PCB) 



1 



i 



l-Chloro-2, 

3-eppxypropane; 

See Epic 
2-Chloroet 



1 
1 

hlorohydrin . J_ 
hanol ; See _[_ 



1305-62-0 
1305-78-8 
1344-95-2 



7778-18-9 



76-22-2 
105-60-2 



105-60-2 



2425-06-1 

133-06-2 

63-25-2 

1563-66-2 

1333-86-4 

124-38-9 

75-15-0 



15 
5 

15 

5 

2 

1 

3 

5 
40 

0. 

5 

5 

0. 

3. 
00 

4 
12 



630-08-0 

558-13-4 

56-23-5 
353-50-4 

_ 120-80-9 
1 9004-34-6 



21351-79-1 

57-74-9 

8001-35-2 



55720-99-5 
7782-50-5 



10049-04-4 



7790-91-2 
107-20-0 



532-27-4 

79-04-9 

108-90-7 



2698-41-1 
74-97-5 



75-45-6 



53469-21-9 



11097-69-1 



Ethylene chlorohydrin I 



J_ i. 5, mq/m^ 

1 5 mq/m^ TWA 1 5 mq/m^ 

1 1 

I 15 mq/m' TWA 1 
1 5 mq/m' TWA 1 

1 1 

I 15 mq/m^ TWA 1 
1 5 mq/m^ TWA 1 
1 2 mq/m^ TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 5 mq/m^ TWA 1 
1 1 

13.5 mq/m^TWA 1 

I 5000 ppm/TWA I 50 
1 20 ppm TWA 1 
1 20 ppm STEL 1 

I 100 ppm (C) 1 
1 50 ppm TWA 1 

1 1 2 

1 1 

1 1 

1 Table Z-2 1 

1 1 

1 1 

1 1 

1 1 

I 15 mq/m^ TWA 1 
1 5 mq/m^ TWA 1 
1 1 

I ■ 5 mq/m' TWA 1 

I ■ 5 mq/m' TWA 1 

1 1 

1 1 

I ■ 5 mq/m' TWA 1 

1 i EEin JCl 1 

1 1 

1 0. 1 ppm TWA 1 

1 1 

1 0^ £Em ICl 1 

1 1 EEm iCl 1 

1 1 

I 0. 05 ppm TWA 1 

1 1 

1 75 ppm TWA 1 

1 1 

10.05 ppm TWA 1 

1 200 ppm TWA 1 2 

1 1 

1 1 

1 I 1000 

1 1 

1 1 mq/m' TWA 1 1 

1 1 

10.5 mq/m' TWA I 0^ 

1 1 

1 1 

1 1 

1 1 

1 1 



TWA 
TWA 



mq/m^ TWA 
mq/m^ TWA 



15 
00 
0_ 
0_ 
2 
2 
5 
5 

15 
5 

2 
0_ 
0_ 
1 

0^ 
0_ 
i, 

1 



mq/m^ TWA 
mq/m^ TWA 
mq/m^ TWA 
mq/m^ TWA 
mq/m^ STEL 
ppm TWA 
ppm STEL 
._!_ mq/m^ TWA 
mq/m^ TWA 
mq/m^ TWA 
._! mq/m^ TWA 
■ 5 mq/m^ TWA 
ppm TWA 
ppm TWA 
ppm STEL 

ppm TWA 

ppm (C) 
._X ppm TWA 
._3_ ppm STEL 

ppm TWA 

ppm TWA 

ppm STEL 

ppm TWA 

mq/m^ TWA 
mq/m^ TWA 
mq/m^ TWA 
._b mq/m' TWA 
._b mq/m^ TWA 
mq/m^ STEL 

._b mq/m^ TWA 
._5 ppm TWA 
. ppm STEL 
:J^ ppm TWA 
._3_ ppm STEL 
J, ppm (C) 
ppm (C) 



15 
00 



. 05 ppm TWA 
. 05 ppm TWA 
ppm TWA 



05 ppm (C 
ppm TWA 



ppm TWA 
mq/m^ TWA 
b_ mq/m^ TWA 



1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 
1 
i 
1 
1 
1 
1 
1 
1 
1 X 

1 
1 
1 
1 

1 X 
1 X 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
1 

i X 

1 
1 
1 
1 
1 

1 X 

1 
1 
1 
1 
1 
1 
1 



X 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1805 



PROPOSED RULES 



Chloroethvlene; J_ 

see Vinyl chloride . ]_ 
Chloroform J_ 

(Trichloromethane) . . . I 
bis (Chloromethyl) 1 

ether; see 1910. 1008. I 
Chloromethyl methyl J_ 

ether; see 1910. 1006. I 
l-Chloro-l-nitropropane| 
Chloropentafluoroethanel 

Chloropicrin I 

beta-Chloroprene I 

o-Chlorostvrene ]_ 

1 

o-Cholorotoluene I 

Chlorpyrifos I 

2-Chloro-6 1 

( trichloromethyl ) J_ 

pyridine I 

Total dust I 

Respirable fraction . . I 

Chromic acid and _L 

chromates (as CrO ( 3) ) I 

Chromium ( II ) compounds I 
(as Cr) I 

Chromium (III ) 1 

compounds (as Cr ) . . . . I 

Chromium metal and J. 
insol ■ salts (as Cr) . I 

Chrysene; see Coal tar J_ 
pitch volatiles I 

Clopidol I 

Total dust I 

Respirable fraction. . I 

Coal dust (less than J_ 
5% SiO(2) ) , 1 

respirable fraction . . I 

Coal dust ( greater than I 
or equal to 5% J_ 
SiO (2) ) , respirable 1 
fraction I 

Coal tar pitch J_ 

yolatiles (benzene J_ 
soluble fraction) , J_ 
anthracene , BaP, _[_ 
phenanthrene, J_ 

acridine, chrysene, J_ 
pyrene I 

Cobalt, me t a 1 ; dust, J_ 
and fume ( as Co ) | 

Cobalt carbonyl ( as Co) I 

Cobalt hydrocarbonyl , . . I 
■ (as Co) I 

Col-ce oven emissions; J_ 
see 1910.1029 I 

Copper _L 

Fume ( as Cu) | 

Dusts and mists J_ 

(as Cu) I 

Cotton dust , raw, (e) | 

see 1910. 1043 I 

1 



1 1 

1 1 

1 1 

67-66-3 1 50 ppm (C) 1 2 ppm TWA 

1 1 

542-88-1 1 1 

1 1 

107-30-2 1 1 

600-25-9 1 20 ppm TWA 1 2 ppm TWA 

76-15-3 1 I 1000 ppm TWA 

76-06-2 1 0. 1 ppm TWA 1 0. 1 ppm TWA 

126-99-8 1 2^ ppm TWA 1 10 ppm TWA 

2039-87-4 1 1 5^ ppm TWA 

I 1 7_5 ppm STEL 

95-49-8 1 1 50 ppm TWA 

2921-88-2 1 1 0^ mq/m^ TWA 

1 i 

1 1 

1929-82-4 1 1 

I 15 mq/m' TWA 1 1_5 mq/m=' TWA 

1 5 mq/m' TWA 1 5 mq/m' TWA 

1 1 

111 1 1 OJ, E£in ici 

1 1 

7440-47-3 10.5 mq/m^ TWA I 0. 5 mq/m^ TWA 

1 1 

7440-47-3 10.5 mq/m^ TWA I 0. 5 mq/m^ TWA 

1 1 

7440-47-3 1 1 mq/m^ TWA I 1 mq/m^ TWA 

1 1 

1 i 

2971-90-6 1 1 

I 15 mq/m' TWA 1 15 mq/m^ TWA 

1 5 mq/m^ TWA 1 5 mq/m' TWA 

1 1 

1 1 
1 Table Z-3 1 2 mq/m" TWA 

1 1 

1 1 

1 1 

1 Table Z-3 1 0. 1 mq/m^ TWA 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 
65966-93-2 10.2 mq/m^ TWA I 0.2 mq/m^ TWA 

1 1 

7440-48-4 1 ■ ■ . ■ 1 0. 1 mq/m.^ TWA 

10210-68-1 1 1 0^ mq/m^ TWA 

16842-03-8 1 1 0^ mq/m^ TWA 

1 1 

1 1 

1 1 

7440-50-8 1 1 

10.1 mq/m^ TWA I 0. 1 mq/m^ TWA 

1 1 

1 1 mq/m^ TWA I 1 mq/m' TWA 

1 1 

1 The time -weigh ted ayeraqe appl 
1 cotton waste processinq operat 
waste recyclinq (blendin 
cleaninq and 1 willowinq) and 



1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 X 

1 

1 

1 

1 X 

1 

1 

1 

1 

1 

1 

1 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
1 
1 
± 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 



1 
les to the 
ion of 
q, sortinq. 



1806 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Crag herbicide (Sesonel 
Total dust 



Respirable fraction . ■ 



Cresol, all isomers . 
Crotonaldehyde 



Cruf ornate . 



Cumene . 



Cvanamide . 



Cyanides ( as CN) 
Cyanogen 



1319-77-3 
_ 123-73-9 
1 4170-30-3 
299-86-5 
98-82-8 
420-04-2 



L4 
-19-5 



Cyanogen chloride . 
Cyclohexane 



Cyclohexanol . 



Cvclohexanone . 



Cyclohexene . 



Cyclohexylamine 1 108-91-8 



Cyclonite . 



Cyclopentadiene . 



Cyclopentane . 



Cyhexatm . 



2, 4-D (Dichlorophen- 

oxvacetic acid) . . . 

Decaborane 



Demeton (Systox) 



Diacetone alcohol 



1 



(4 -Hydroxy- 4 -methyl- J_ 
2-pentanone) 



1 , 2-Diaminoethane; 

see Ethylenediamine ■ . 
Diazinon 



1 



Diazomethane . 



Diborane . 



1, 2-Dibromo-3- 

chloropropane ( CBCP) ; 
see 1910.1044 



1 , 2-Dibromoethane; see J_ 
Ethylene dibromide . . 



2-N-Dibutylaminoethanol 



Dibutyl phosphate . 



Dibutyl phthalate . 
Dichloroacetylene. 



o-Dichlorobenzene . 



p-Dichlorobenzene. 



3,3'-Dichlorobenzidine; 



see 1910. 1007 

Dichlorodif 1 UP rome thane 



1, 3-Dichloro-5, 5- 1 
dimethyl hydantoin. . . 



i 

Dichlorodiphenvltri- J_ 
chloroethane (DDT) . . 



1, 1-Dichloroethane . 



lj_ 



-Diet 



hloroethane; see 
Ethylene dichloride. . 



1, 2-Dichloroethylene ■ . . 



Dichloroethvl ether . 



136-78-7 



460 



506-77-4 
110-82-7 
108-93-0 
108-94-1 
110-83-8 



121-82-4 

542-92-7 

287-92-3 

13121-70-5 



94-75-7 
17702-41-9 



8065-48-3 



123-42-2 



333-41-5 

334-88-3 

19287-45-7 



1 



1 



Dichlo rome thane; see 
Methylene chloride . 



96-12-i 



02-81-8 
107-66-4 



84-74-2 

7572-29-4 

95-50-1 

106-46-7 



91-94-1 
75-71-8 



118-5: 



50-29-3 
75-34-3 



540-59-0 
111-44-4 



garretting 

1 1 

1 15_ mg/m" TWA I 
1 5 mg/m^ TWA I 
1 5 ppm TWA 1 
1 2 ppm TWA 1 

1 1 

1 1 

1 iQ_ ppm TWA 1 

1 1 

1 5 mg/m' TWA I 

i 1 

1 1 

I 300 ppm TWA 1 

1 1^ ppm TWA 1 

1 50 ppm TWA 1 

I 300 ppm TWA 1 

1 1 

1 1 

1 75 ppm TWA 1 

1 1 

1 1 

1 1 

I 10 mg/m' TWA 1 
10.05 ppm TWA 1 

1 1 

10.1 mg/m' TWA I 

1 1 

1 1 

1 50 ppm TWA 1 

1 1 

1 1 

1 1 

1 0.2 ppm TWA 1 
1 0. 1 ppm TWA 1 
1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 ppm TWA 1 

1 1 

1 5 mg/m" TWA I 

1 1 

1 50 EEm ICl 1 
1 75 ppm TWA 1 

1 1 

1 1 

1 1 

I 1000 ppm TWA I 1 

i 1 

10.2 mg/m' TWA I 

1 1 

1 1 

1 1 mg/m" TWA 1 

1 100 ppm TWA 1 

1 1 ' 

1 1 

1 200 ppm TWA 1 

1 15 EEIQ ICl 1 

1 1 

1 1 

1 1 



10 
5 
5 
2 



mg/m^ TWA 
mg/m^ TWA 
ppm TWA 
ppm TWA 



5 

50 
2 
5 

10 

0. 

300 

50 

25 
300 

10 
1 

11 

600 

5 



5 mg/m^ TWA 
ppm TWA 
mg/m^ TWA 
mg/m^ TWA 
ppm TWA 

. 3 ppm ( C) 
ppm TWA 
ppm TWA 
ppm TWA 
ppm TWA 
ppm TWA 

, 5 mg/m 
ppm TWA 
ppm TWA 
mg/m^ TWA 



TWA 



10 mg/m^ TWA 
0. 05 ppm TWA 

■ 15 ppm STEL 
0. 1 mg/m' TWA 



50 ppm TWA 



1 mg/m' TWA 
2. ppm TWA 
1_ ppm TWA 



2 

1 
2 
5 

0^ 
50 
25 
110 



ppm TWA 

ppm TWA 
ppm STEL 
mg/m' TWA 
J, ppm (C) 
ppm (C) 



ppm TWA 
ppm STEL 



000 ppm TWA 



0. 
0. 

1 
100 



200 

5 

10 



._2 mg/m' TWA 
._A mg/m' STEL 

mg/m' TWA 
ppm TWA 



ppm TWA 
ppm TWA 
ppm STEL 



1 

1 

1 

1 X 

1 

1 

1 

1 X 

1 
1 
1 
1 
1 

1 X 
1 X 

1 
1 

1 X 

1 
1 
1 
1 
1 

1 X 

1 

1 X 

1 
1 
1 
1 
1 

1 X 

1 
1 
1 
1 
± 
1 
± 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
i 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 

1 
1 



X 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1807 



PROPOSED RULES 



Dichloromonof luoro- J_ 
methane I 

1, 1-Dichloro-l- 1 
nitroethane I 

1 , 2-Dichloropropane; J_ 
see J_ 

Propylene dichloride . I 

1 , 3 Dichloropropene ■ . . . I 

2, 2-Dichloropropionic J_ 
acid J_ 

Dichlorotetrafluoro- J_ 

ethane I 

Dichlorvos (DDVP) I 

Dicrotophos I 

Dicyclopentadiene I 

Dicyclopentadienyl iron I 

Total dust I 

Respirable fraction . . I 

Dieldrin I 

Diethanolamine I 

Diethylamine I 

1 

2-Diethylaminoethanol . . I 
Diethyl ether; J. 

see Ethyl ether I 

Diethyl ketone I 

Diethyl phthalate I 

Diethylene triamme . . . . I 
Di f luorodibromomethane ■ I 
Diqlycidyl ether (DGE) ■ I 
Dihydroxybenzene; J_ 

see Hydroquinone I 

Diisobutvl ketone I 

Diisopropylamme I 

4 -Dimethyl ami noazo- J_ 
benzene; J_ 

see 1910.1015 I 

Dime thoxyme thane; J_ 

see Methylal I 

Dimethyl acetamide I 

Dimethylamme I 

Dimethylaminobenzene; J_ 

see Xylidine I 

Dimethyl am line _[_ 

(N, N-Dimethylaniline ) I 

Dimethylbenzene; ]_ 

see Xylene I 

Dimethyl-1, 2-dibromo-2, I 
2-dichloroethyl _1_ 

phosphate [ 

Dimethylf ormamide I 

2, 6-Dimethyl-4- J. 
heptanone; see J_ 
Diisobutyl ketone . . . . I 
1, 1-Dimethylhydrazine ■ . I 

Dimethylphthalate | 

Dimethyl sulfate I 

Dinitolmide J_ 

( 3, 5-dinitro- _L 

0-toluamide) | 

Dinitrobenzene J_ 

(all isomers ) | 

(ortho) I 

(meta) I 

(para) I 



75-43-4 



594-72-9 



542- 


-75- 


-6 


75- 


-99- 


-0 


76- 


-14- 


-2 


62- 


-73- 


-7 


141- 


-66- 


-2 


77- 


-73- 


-6 


102- 


-54- 


-5 


60- 


-57- 


-1 


111- 


-42- 


-2 


109- 


-89- 


-7 


100- 


-37- 


-8 


96- 


-22- 


-0 


84- 


-66- 


-2 


111- 


-40- 


-0 


75- 


-61- 


-6 


2238- 


-07- 


-5 


108- 


-83- 


-8 


108- 


-18- 


-9 


60- 


-11- 


-7 


127- 


-19- 


-5 


124- 


-40- 


-3 


121- 


-69- 


-7 



300-76-5 
68-12-2 



57-14-7 

131-11-3 

77-78-1 



148-01-6 



528-29-0 

99-65-0 

100-25-4 



1 1 
I 1000 ppm TWA 1 

1 1 

1 10 EEIQ 1£1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 
I 1000 ppm TWA 

1 1 mq/m' TWA 

1 1 

1 1 

1 1 
I 15 mq/m^ TWA 1 

1 5 mq/m' TWA 1 
10.25 mq/m'TWAI 

1 1 

1 25 ppm TWA 1 

1 1 

1 10 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 100 ppm TWA 1 

10-5 ppm ICi 1 

1 1 

1 1 

1 50 ppm TWA 1 

1 5 ppm TWA 1 

1 1 

1 i 

1 i 

1 1 

1 1 

1 10 ppm TWA 1 

1 10 ppm TWA 1 

1 1 

1 1 

1 5 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 3 mq/m^ TWA 1 

1 10 ppm TWA 1 

1 1 

1 1 

1 1 

10.5 ppm TWA 1 

1 5 mq/m-' TWA I 

1 1 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 mq/m^ TWA I 

1 1 

1 1 



10 ppm TWA 
2 ppm TWA 

1 ppm TWA 

1 ppm TWA 

1000 ppm TWA 



1 mq/m^ TWA 
0.25 mq/m^ TWA 
5 ppm TWA 

10 mq/m^ TWA 
5 mq/m' TWA 
0.25 mq/m^ TWA 
3, ppm TWA 

10 ppm TWA 

25 ppm STEL 

10 ppm TWA 

200 ppm TWA 
5 mq/m' TWA 
1 ppm TWA 

100 ppm TWA 

0. 1 ppm TWA 



25 ppm TWA 
5 ppm TWA 



10 ppm TWA 
10 ppm TWA 



5 ppm TWA 
10 ppm STEL 



3 mq/m^ TWA 
10 ppm TWA 



0. 5 ppm TWA 
5 mq/m^ TVJA 
0. 1 ppm TWA 

5 mq/m' TWA 

1 mq/m' TWA 



1 

1 

1 

1 

1 

1 

i 

1 X 

1 

1 

1 

1 

1 X 

1 X 

1 
1 
1 
1 

1 X 

1 
1 
1 

1 X 

1 
i 
1 
1 
1 
1 
i 
1 
1 
1 

1 X 

1 
1 
1 
1 
1 

1 X 

1 
1 
i 

i X 
1 X 

1 
1 
1 
1 

1 X 
1 X 

1 
1 
1 

1 X 

1 

1 X 

1 
i 
1 
1 
1 

1 X 

1 
1 



1808 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



I 



25321- 


-14- 


-6 


123- 


-91- 


-1 


78- 


-34- 


-2 


92- 


-52- 


-4 


122- 


-39- 


-4 



I 



> 



Dinitro-o-cresol I 534-52-1 

Dinitrotoluene I 

Dioxane i. 

(Diethvlene dioxide) . I 

Dioxathion I 

Diphenyl (Biphenvl) . . . . I 

Diphenvlamine I 

Diphenvlme thane J_ 

diisocvanate; see _L 

Methylene bisphenyl J. 

isocvanate I 

Dipropyl ketone I 123-19-3 

Dipropylene glycol 1 34590-94-8 

methyl ether. I 34590-94-8 

Diguat I 85-00-7 

Di-sec octyl phthalate J_ 

(Pi- (2-ethylhexvl) 1 117-81-7 

phthalate) I 

Disulfiram (Antabuse) . . I 97-77-8 

Disulfoton I 298-04-4 

2, 6-Di-tert-butyl- 1 

p-cresol I 128-37 

Diuron I 330-54-1 

Diyinyl benzene I 108-57-6 

Emery I 12415-34-8 

Total dust I 

Respirable fraction . . I 

Endosulfan I 115-29-7 

Endrin I 72-20-8 

Epichlorohydrin I 106-89-8 

EPN I 2104-64-5 

1 , 2-Epoxvpropane; see J_ 
Propylene oxide I 

2, 3-Epoxv-l-propanol; J_ 
see Glycidol I 

Ethanethiol; see J_ 

Ethyl mercaptan I 

Ethanolamine I 141-43-5 

Ethion I 563-12-2 

2-Ethoxvethanol 1 

(Cellosolye) I 110-80-5 

2-Ethoxyethvl acetate J_ 

(Cellosolye acetate) . I 111-15-9 

Ethyl acetate I 141-78-6 

Ethyl acrylate I 140-88-5 

1 

Ethyl alcohol (Ethanol) I 64-17-5 

Ethylamine I 75-04-7 

Ethyl amvl Itetone _L 

(5-Methyl-3- 1 

heptanone) I 106-68-3 

Ethyl benzene I 100-41-4 

I 

Ethyl bromide I 74-96-4 

1 

Ethyl butyl l<etone 1 

(3-Heptanone) I 106-35-4 

Ethyl chloride I 75-00-3 

Ethyl ether I 60-29-7 

I 

Ethyl formate I 109-94-4 

Ethyl mercaptan I 75-08-1 

Ethyl silicate I 78-10-4 



10.2 mg/m^TWA 1 
11.5 mg/m^TWA 1 

1 1 

I 100 ppm TWA 1 

1 1 

10.2 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 100 ppm TWA 1 

1 1 

1 1 

1 1 

1 5 mg/m^ TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

I 15 mg/m' TWA 1 
1 5 mg/m^ TWA 1 

1 1 

10.1 mg/m^TWA 1 
1 5 ppm TWA 1 
10.5 mg/m'TWA 1 
1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 3 ppm TWA 1 

1 1 

1 1 

1 1 

1 200 ppm TWA 1 

1 1 

1 100 ppm TWA 1 
1 400 ppm TWA 1 
1 25 ppm TWA 1 

1 1 

I 1000 ppm TWA 11 
1 iO ppm TWA 1 
1 1 

1 1 

1 25 ppm TWA 1 
1 100 ppm TWA 1 

1 1 

1 200 ppm TWA 1 
1 1 

1 1 

1 50 ppm TWA 1 
I 1000 ppm TWA J_l 

1 400 ppm TWA 1 

1 1 

1 100 ppm TWA 1 

1 10 Q£m ±Cl 1 

1 100 ppm TWA 1 







2 mg/m^ 

1 ■ 5 mg/m^ 



TWA 
TWA 



25 ppm TWA 
0.2 mg/m^ TWA 
0.2 ppm TWA 

10 mg/m' TWA 



50 ppm TWA 
100 ppm TWA 
150 ppm STEL 

0. 5 mg/m^ TWA 

5 mg/m^ TWA 
10 mg/m^ STEL 
2 mq/m^ TWA 
0. 1 mg/m" TWA 

10 mg/m^ TWA 
10 mg/m^ TWA 
10 ppm TWA 

10 mg/m^ TWA 
5. mg/m^ TWA 
0. 1 mg/m^ TWA 
0. 1 mg/m^ TWA 
2 ppm TWA 
0. 5 mg/m^ TWA 



3 ppm TWA 

6 ppm STEL 

0. 4 mg/m^ TWA 

200 ppm TWA 



100 ppm 

400 ppm 

5 ppm 

25 ppm 

000 ppm 



10 ppm 



TWA 

TWA 

TWA 

STEL 

TWA 

TWA 



25 ppm TWA 
100 ppm TWA 
125 ppm STEL 
200 ppm TWA 
250 ppm STEL 

50 ppm TWA 
000 ppm TWA 
400 ppm TWA 
500 ppm STEL 
100 ppm TWA 
0. 5 ppm TWA 

10 ppm TWA 



1 X 
1 X 

1 

1 X 
1 X 

1 
1 
1 
1 
1 
1 
1 

1 X 

1 
1 
1 
1 
1 
1 

1 X 

1 
1 
1 
1 
1 
1 
1 

1 X 

1 X 

1 X 

1 X 

1 
1 
1 
1 
1 
1 
1 
1 

1 X 

1 

1 X 

1 

1 X 

1 

1 X 

1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1809 



PROPOSED RULES 



107- 


-15- 


-3 


106- 


-93- 


-4 


107- 


-06- 


-2 






107- 


-21- 


-1 


628- 


-96- 


-6 



Ethylene chlorohydrm . . I 107-07-3 

Ethylenediamine I 

Ethylene dibromide I 

Ethylene dichloride ]_ 

( 1, 2-Dichloroethane) . I 

1 

1 

Ethylene glycol I 

Ethylene glycol ]_ 

dinitrate I 

Ethylene glycol methyl J. 

acetate; see Methyl ]_ 

cellosolve acetate . . . I 
Ethyleneimine; ]_ 

see 1910. 1012 I 151-56-4 

Ethylene oxide; J_ 

see 1910.1047 | 75-21-8 

Ethvlidene chloride; J_ 

see 1, 1-Dichlorethane I 

N-Ethylmorpholine I 100-74-3 

Fenamiphos I 22224-92-6 

Fensulfothion I 115-90-2 

Fenthion I 55-38-9 

Ferbam I 14484-64-1 

Total dust I 

Respirable fraction . I 
Ferrovanadium dust I 12604-58-9 

1 

Fluorides (as F) I 

Fluorine I 7782-41-4 

Fluorot rich lor omethane J_ 

(Trichloro- 1 

fluoromethane) I 75-69-4 

Fonofos I 944-22-9 

Formaldehyde; J_ 

see 1910. 1048 I 50-00-0 

Formamide J_ 7 5- 12-7 

Formic acid I 64-18-6 

Furfural I 98-01-1 

Furfuryl alcohol I 98-00-0 

j_ 

Gasoline I 8006-61-9 

Germanium tetrahydride . I 7782-65-2 
Glycerin (mist) I 56-81-5 

Total dust I 

Respirable fraction. . I 

Glycidol I 556-52-5 

Glycol monoethyl ether; I 

see 2-Ethoxyethanol . . I 
Gram dust ( oat , wheat J_ 

barley) I 

Graphite, natural J_ 

respirable dust I 7782-42-5 

Graphite, synthetic J_ none 

Total dust I 

Respirable Fraction . . I 
Guthion; J_ 

see Azinphos methyl . . I 
Gypsum 1 13397-24-5 

Total dust I 

Respirable fraction . . I 

Hafnium I 7440-58-6 

Heptachlor I 76-44-8 



1 5 ppm TWA 1 i 
1 10 ppm TWA 1 iO 
1 Table Z-2 1 ^^ 

1 1 

1 50 ppm TWA 1 1 
I 100 ppm STEL 1 2 
I 200 ppm (C) 1 
1 1 50 

1 1 

I 1 mg/m^ (C) 1 0^ 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 20 ppm TWA 1 5 

1 1 0, 

1 1 0, 

1 1 0, 

1 1 

I 15 mg/m^ TWA 1 10 

1 5 mq/m^ TWA 1 5 

1 i mg/m^ TWA 1 i 

1 1 3 

12.5 mg/m^ TWA I 2^ 

10.1 ppm TWA 1 0^ 

1 i 

1 1 

I 1000 ppm TWA I 1000 

1 1 0^ 

1 i 

1 1 

1 1 20 

1 1 30 

1 5 ppm TWA 1 5 

1 5 ppm TWA 1 2 

1 50 ppm TWA 1 10 

1 1 15 

1 1 300 

1 1 500 

1 1 0, 

I 15 mq/m' TWA 1 

1 1 10 

1 1 5 

1 50 ppm TWA 1 25 

1 1 

1 i 

1 1 

1 i 10 

1 1 

1 Table Z-3 1 2_. 

1 1 

I 15 mg/m^ TWA 1 10 
1 5 mq/m^ TWA 1 5 
1 1 

1 1 

1 1 

I 15 mq/m" TWA 1 15 
1 5 mg/m" TWA 1 5 
10.5 mg/m"TWA 1 0_. 
10.5 mq/m'TWA 1 £. 



ppm (C) 
ppm TWA 



ppm TWA 
ppm STEL 



ppm (C) 

1 mq/m' STEL 



ppm TWA 

1 mq/m' TWA 

1 mq/m' TWA 

2 mq/m" TWA 

mq/m^ TWA 
mq/m^ TWA 
mq/m^ TWA 
mq/m^ STEL 
b_ mq/m^ TWA 
1 ppm TWA 



ppm (C) 
mq/m^ TWA 



ppm TWA 
ppm STEL 
ppm TWA 
ppm TWA 
ppm TWA 
ppm STEL 
ppm TWA 
ppm STEL 
2 ppm TWA 

mq/m^ TWA 
mq/m^ TWA 
ppm TWA 



mq/m^ TWA 

^ mq/m^ TWA 

mq/m^ TWA 
mq/m' TWA 

mg/m^ TWA 
mg/m' TWA 
5 mg/m' TWA 
5. mg/m' TWA 



1 X 

1 

1 

1 

1 

1 

1 

1 

1 

1 X 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 X 

1 X 

1 

1 X 

1 
1 
1 
1 
1 
1 
1 
1 
1 
i 

1 X 

1 
1 
1 
i 
i 

1 X 
1 X 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 



1810 



NORTH CAROLINA REGISTER 



November 15, 1995 10:I6A 



PROPOSED RULES 



Heptane (n-Heptane) 



Hexachlorobutadiene . 



Hexachlo roe thane . 



Hexachloronaphthalene . 



Hexaf luoroacetone J_ 

n-Hexane 



Hexane isomers . 



2-Hexanone (Methyl 
n-butvl ketone) . . 

Hexone (Methyl 

isobutyl ketone) . 



1 



1 



sec-Hexyl acetate . 



Hexylene glycol , 
Hydrazine 



Hydrogen bromide . 



Hydrogen chloride . 



Hydrogen cyanide . 



Hydrogen fluoride 
(as F) 



1 



Hydrogen peroxide . 



Hydrogen selenide 
(as Se) ■ ■ ■ . 



Hydrogen sulfide. 



1 



Hydrogenated terphenyls 
Hydroquinone 



2-Hvdroxypropyl 
acrylate 



1 



Indene . 



Indium &. compounds 

(As In) 

Iodine 



Iodoform. 



Iron oxide, dust & fume 

Total particulate . . . 

Iron pentacarbonyl 



Iron s_ 
(as 



alts ( soluble ) 
Fe) 



Isomyl acetate . 



Isomyl alcohol 
(primary and 
secondary) . . . 



Isobutyl acetate . 



Isobutyl alcohol . 



Isooctyl alcohol . 
Isophorone 



Isophorone diisocyanate 



2-Isopropoxyethanol . 



Isopropyl acetate . 



Isopropyl alcohol . 



Isopropylamine . 



n-Isopropylaniline . 



Isopropyl ether . 



Isopropyl glycidyl 
ether (IGE) 



142-82-5 I 500 ppm TWA 1 400 ppm TWA 

1 1 500 ppm STEL 

87-68-3 1 1 0. 02 ppm TWA 

67-72-1 1 1 ppm TWA 1 i ppm TWA 
1335-87-1 10.2 mg/m'TWA 1 0.2 mg/m" TWA 

684-16-2 1 1 0. 1 ppm TWA 

110-54-3 I 500 ppm TWA 1 5^ ppm TWA 

Varies 1 1 500 ppm TWA 

1 I 1000 ppm STEL 

1 1 

591-78-6 1 100 ppm TWA 1 5 ppm TWA 

1 1 

108-10-1 1 100 ppm TWA 1 50 ppm TWA 

1 1 75 ppm STEL 

108-84-9 1 50 ppm TWA 1 50 ppm TWA 

107-41-5 1 1 25 EEm (C) 

302-01-2 1 1 ppm TWA 1 0. 1 ppm TWA 

10035-10-6 1 3 ppm TWA 1 3 ppm JCJ. 

7647-01-0 1 5 ppm (C) 1 5 ppm (C) 

74-90-8 1 10 ppm TWA 1 4.7 ppm STEL 

1 i 

7664-39-3 1 1 6 ppm STEL 

7722-84-1 1 1 ppm TWA 1 1 ppm TWA 

1 i 

7783-07-5 I 0. 05 ppm TWA 1 0. 05 ppm TWA 

7783-06-4 1 Table Z-2 1 10 ppm TWA 

1 1 15 ppm STEL 

61788-32-7 1 1 0_^ gprn TWA 

123-31-9 1 2 mq/m^ TWA 1 2 mg/m^ TWA 

1 1 

999-61-1 1 1 0^ EEm TWA 

95-13-6 1 1 10 ppm TWA 

1 1 

7440-74-6 1 1 0. 1 mg/m^ TWA 

7553-56-2 10.1 mg/m^ (C) 1 0. 1 ppm (C) 

75-47-8 1 1 0. 6 ppm TWA 

1 1 

1309-37-1 1 iO mq/m^ TWA I 10 mg/m^ TWA 

13463-40-6 1 1 0^ Epm TWA 

1 1 0.2 ppm STEL 

J_ Varies with I ]_ 

1 1 1 mg/m' TWA 

1 100 ppm TWA 1 100 ppm TWA 

1 1 

1 100 ppm TWA 1 100 ppm TWA 

1 1 125 ppm STEL 

1 150 ppm TWA 1 150 ppm TWA 

78-83-1 1 100 ppm TWA 1 50 ppm TWA 

26952-21-6 1 1 50 ppm TWA 

78-59-1 1 25 ppm TWA 1 4 ppm TWA 

4098-71-9 1 1 0.005 ppm TWA 

1 1 0. 02 ppm STEL 

109-59-1 1 1 25 ppm TWA 

108-21-4 1 250 ppm TWA 1 250 ppm TWA 

1 1 310 ppm STEL 

67-63-0 1 400 ppm TWA 1 400 ppm TWA 

1 1 500 ppm STEL 

75-31-0 1 5 ppm TWA 1 5 ppm TWA 

1 1 10 ppm STEL 

768-52-5 1 1 2 EEm TWA 

108-20-3 1 500 ppm TWA 1 500 ppm TWA 

1 1 
4016-14-2 1 50 ppm TWA 1 50 ppm TWA 
1 I 75 ppm STEL 



1 



1 



1 



compound 
123-92-2 



1 
1 



123-51-3 
110-19-0 



1 

1 

1 

1 X 

1 X 

1 X 

1 
1 
1 
1 
1 
i 
1 
1 
1 
1 

1 X 

i 
1 

1 X 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 

i 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
i 
1 
1 
1 
1 
1 

1 X 

1 

1 X 

1 
1 
1 
1 
1 
1 
1 
1 

1 X 

1 
1 
1 
1 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1811 



PROPOSED RULES 



Kaolin 


. 1 


1332- 


-58- 


-7 


Total dust 


• 1 


463- 

7439- 
1317- 

58- 
7580- 

68476- 
546- 

1309- 

121- 

108- 

7439- 
7439- 

12079- 
1317- 
1317- 

7439- 
7439- 
7439- 
7439- 
141- 

79- 

16752- 
72- 

109- 

110- 

150- 
79- 

74- 

96- 
126- 


-51- 

-92- 
-65- 

-89- 
-67- 

-85- 
-93- 

-48- 

-75- 

-31- 

-96- 
-96- 

-65- 
-35- 
-65- 

-97- 
-97- 
-97- 
-97- 
-79- 

-14- 

-77- 
-43- 

-86- 

-49- 
-76- 
-20- 

-99- 

-33- 
-98- 




Respirable fraction. 


. 1 




Ketene 


. 1 


-4 




. 1 






• 1 




see 1910. 1025 


■ 1 


-1 


Limestone 


. 1 


-3 


Total dust 


• 1 




Respirable fraction. 


. 1 




Lindane 


. 1 


-9 




1 


-8 


L.P.G. (Liauified 


1 

■ 1 


-7 


Maanesite 


. 1 


-0 


Total dust 


- 1 




Respirable fraction. 


i 




Magnesium oxide fume.. 


. 1 


-4 


Total Particulate... 


1 




Respirable fraction. 


1 




Malathion 


. 1 


-5 


Total dust 


1 




Respirable fraction. 


1 




Maleic anhydride 


1 


-6 


Manaanese compounds 
(as Mn) 


1 

1 


-5 


Manqanese fume (as Mn) 


1 


-5 


Manganese cvclopentadi- 


1 

-1 




envl tricaronvl (as Mn 


1 


-1 


Manaanese tetroxide(Mn 


1 


-7 


Marble 


1 


-3 


Total dust 


1 




Respirable fraction. 


1 




Mercury (aryl and 

inorganic) (as Ha) . . . 


1 

1 


-6 


Mercury (orqano) alkyl 
compounds (as Ha) . . . 


1 

1 


l6 
-6 


Mercury (vapor) (as Ha 


1 


-6 


Mesitvl oxide 


1 


-7 








Methacrylic acid 


1 


-4 


Me thane thiol ; 

see Methyl mercaptan 


1 

1 




Methomyl 


1 


-5 


Methoxychlor 

Total dust 


1 
1 


:5 


Respirable fraction. 


1 




2-Methoxyethanol; 

(Methyl cellosolve) . 


1 

1 


-4 


2-Methoxyethvl acetate 
(Methyl cellosolve 
acetate) 


1 
1 

J 


-6 


4-Methoxyphenol 


1 


-5 


Methyl acetate 


1 


-9 




I 




Methyl acetylene 

(Propyne) 


1 

1 


-7 


Methyl acetylene 

propadiene mixture 
(MAPP) 


1 
1 






_i 




Methyl acrylate 


1 


-3 


Methvlacrylonitrile . . . 


1 


-7 


Methvlal 


1 





1 1 

1 lb mq/m^ 1 
J_ 5, mg/m^ J_ 
1 0. 5 ppm TWA 1 
1 1 

1 1 

1 1 

1 1 

1 15 ma/m^ 1 
J_ 5. mq/m^ _L 
10.5 mq/m'TWA 1 
I 0.025mq/m^TWAI 

1 1 

I 1000 ppm TWA I 10 

1 1 

1 15 mq/m^ TWA I 
1 5 mq/m' TWA I 

1 1 

1 15 mq/m' TWA I 
1 5 mq/m^ TWA I 

1 1 

1 15 mq/m^ TWA I 
1 5 mg/m^ TWA I 
10.25 ppm TWA 1 

1 1 

1 5 mg/m^ (O I 

1 5 mg/m^ (C) I 

1 1 

1 1 

1 1 

1 1 

1 1 

1 15 mq/m^ TWA I 
1 1 

1 1 

10.1 mq/m'TWA 1 
10.01 mq/m'TWAI 
10.04 mg/m' (C) I 
10.1 mg/m^ TWA I 

1 25 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

I 15 mg/m^ TWA 1 
1 5 mg/m' TWA 1 

1 1 

1 25 ppm TWA 1 

1 1 

1 1 

1 25. ppm TWA 1 

1 1 

1 200 ppm TWA 1 2 
1 12 

1 1 

I 1000 ppm TWA I 10 

1 1 

1 1 
I 1000 ppm TWA I 10 

1 112 

1 iO ppm TWA 1 

1 1 

1 1 



10 
5 
0, 
1. 



15 
5 
0_ 




mg/m' 


TWA 


mq/m^ 


TWA 


5 ppm 
5 ppm 


TWA 
STEL 



mq/m^ TWA 
mg/m^ TWA 
_5 mq/m^ TWA 
025 mq/m' TWA 



00 ppm TWA 



15 
5 

10 
5 

10 
5 

0, 



mq/m^ TWA 
mq/m^ TWA 

mq/m^ TWA 
mq/m^ TWA 

mq/m^ TWA 
mq/m^ TWA 
,25 ppm TWA 



5 
1 
3 

0^ 
1 

15 
5 

0, 
0^ 
0^ 

25 

25 

20 



mq/m^ TWA 
mq/m^ TWA 
mg/m' STEL 



._!_ mg/m^ TWA 
mq/m^ TWA 



TWA 
TWA 



mq/m^ 
mg/m^ 



1 mg/m^ (C) 
01 mg/m^ TWA 
03 mg/m^ STEL 
05 mg/m" TWA 
ppm TWA 
ppm STEL 
ppm TWA 



2 . 5 mg/m' TWA 



10 
5 



mg/m^ TWA 
mg/m^ TWA 



5 
00 
50 



mq/m^ TWA 
ppm TWA 
ppm STEL 



00 ppm TWA 



00 
50 
10 

1 



ppm TWA 
ppm STEL 
ppm TWA 
ppm TWA 



X 



1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 X 

1 

1 

1 

1 

1 

1 

1 

1 X 

1 
1 
1 
1 
1 

1 X 
1 X 

1 

1 X 

1 
1 

1 X 

1 
1 
1 
1 
1 
1 
1 

1 X 

1 
1 

1 X 

1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 
1 X 

1 



1812 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



(Dimethoxvmethane) . . . I 109-87-5 

Methyl alcohol I 67-56-1 

1 

Methvlamine I 74-89-5 

Methyl amyl alcohol; ]_ 

see Methyl Isobutyl X 

carbinol I 

Methyl n-amyl ketone. . . I 110-43-0 

Methyl bromide I 74-83-9 

Methyl butyl ketone; J_ 

see 2-Hexanone I 

Methyl cellosolve; 1 

see 2-Methoxyethanol ■ I 
Methyl cellosolye J_ 

acetate; J_ 

see 2-Methoxyethyl J_ 

acetate I 

Methyl chloride I 74-87-3 

1 

Methyl chloroform J_ 

(1,1, 1-Trichloro- 1 71-55-6 
ethane) I 

Methyl 2-cyanoacrvlate 1 137-05-3 

1 

Methylcyclohexane I 108-87-2 

Methylcyclohexanol I 25639-42-3 

o-Methylcyclohexanone ■ . I 583-60-8 

1 

2-Methylcyclopenta- J_ 

dienyl manganese J_ 

tricarbonyl (as Mn) . . I 12108-13-3 

Methyl demeton I 

4,4' -Methylene bis (2- 1 
chloroaniline) (MBOCA) . I 

Methylene chloride I 

Methyl ethyl ketone J_ 

(MEK) ; see 2-Butanone I 
Methyl ethyl ketone J_ 

peroxide (MEKP) I 

Methyl formate I 

I 

Methyl hydrazine J_ 

(Monomethyl X 

hydrazine) I 60-34-4 

Methyl iodide I 74-88-4 

Methyl isoamyl ketone . . I 110-12-3 
Methyl isobutyl J_ 

carbinol I 108-11-2 

I 

Methyl isobutyl ketone; I 

see Hexone | 

Methyl isocyanate I 624-83-9 

Methyl isopropyl ketone I 

Methyl mercaptan I 

Methyl methacrylate . . . . I 

Methyl parathion | 

Methyl propyl ketone; J_ 

see 2-Pentanone I 

Methyl silicate I 681-84-5 

alpha-Methyl styrene. . . I 98-83-9 

1 

Methylene bis (4- _[_ 

cyclohexvlisocyanate) I 5124-30-1 
Methylene bisphenyl ]_ 



8022- 


-00- 


-2 


101- 


-14- 


-4 


75- 


-09- 


-2 


1338- 


-23- 


-4 


107- 


-31- 


-3 



563- 


-80-4 


74- 


-93-1 


80- 


-62-6 


298- 


-00-0 



I 1000 ppm TWA I 1000 

1 200 ppm TWA 1 200 

1 1 250 

1 10 ppm TWA 1 10 

1 1 

1 i 

i 1 

1 100 ppm TWA 1 100 

1 20 ppm (C) 1 5 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 100 ppm TWA 1 50 

1 200 2£in ICL 1 iOO 

1 1 

1 350 ppm TWA 1 350 

1 1 450 

1 12 

1 11 

1 500 ppm TWA 1 400 

1 100 ppm TWA 1 ^ 

1 100 pm TWA 1 50 

1 1 75 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 Table Z-2 1 

1 1 

1 1 

1 1 

1 1 

1 100 ppm TWA 1 100 

1 1 150 

i 1 

1 1 

1 0^ 2£ffi ICl 1 0. 

1 5 ppm TWA 1 2 

1 1 50 

1 1 

1 25 ppm TWA 1 25 

1 1 40 

1 1 

1 1 
I 0. 02 ppm TWA 1 0. 

1 1 200 

1 ijD ppm (C) 1 10 

1 100 ppm TWA 1 100 

1 1 

1 1 

1 1 

1 1 1 

1 100 ppm (C) 1 100 

1 1 100 

1 1 

1 10. 

1 1 



ppm TWA 
ppm TWA 
ppm STEL 
ppm TWA 



ppm TWA 
ppm TWA 



X 



ppm TWA 
ppm STEL 



ppm 
ppm 
ppm 
ppm 
ppm 
ppm 
ppm 
ppm 



TWA 

STEL 

TWA 

STEL 

TWA 

TWA 

TWA 

STEL 



mq/m^ 



TWA 
TWA 



02 ppm TWA 



J_ EEE (C) 

ppm TWA 
ppm STEL 



_2 EEffi (C) 
ppm TWA 
ppm TWA 



ppm TWA 
ppm STEL 



02 ppm TWA 
ppm TWA 
ppm (C) 
ppm TWA 
_2 mq/m^ TWA 



ppm TWA 
ppm (C) 
ppm STEL 

■ 01 ppm (C) 



X 



1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 X 

1 

1 X 

1 X 

1 



X 



1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 

1 



X 



X 
X 



X 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1813 



PROPOSED RULES 



isocvanate (MDI ) I 101-68-8 

Metribuzin I 21087-64-9 

Mica; see Silicates . . . . I 
Molybdenum (as Mo ) I 7439-98-7 

Soluble compounds . . . . I 

Insoluble Compounds J_ 

Total dust I 

Respirable fraction I 

Monocrotophos I 6923-22-4 

Monomethvl aniline I 100-61-8 

Monomethyl hydrazine; J_ 

see Methyl hydrazine . I 
Morpholme I 110-91-8 

I 

Naphtha (Coal tar) I 8030-30-6 

Naphthalene I 91-20-3 

1 

alpha-Naphthylamine; J_ 

see 1910. 1004 I 134-32-7 

beta-Naphthylamine; J_ 

see 1910. 1009 I 91-59-8 

Nickel carbonyl (as Ni) I 13463-39-3 
Nickel , metal and ]_ 

insoluble compounds J_ 

(as Ni) I 7440-02-0 

Nickel , soluble J_ 

compounds (as Ni) . . . . I 7440-02-0 

Nicotine I 54-11-5 

Nitric acid I 7697-37-2 

I 

Nitric oxide I 10102-43-9 

p-Nitroanilme I 100-01-6 

Nitrobenzene I 98-95-3 

p-Nitrochlorobenzene ■ . . I 100-00-5 
4-Nitrodiphenyl; \_ 

see 1910.1003 I 92-93-3 

Nitroethane I 79-24-3 

Nitrogen dioxide I 10102-44-0 

Nitrogen trifluoride. . . I 7783-54-2 

Nitroglycerin I 55-63-0 

Nitromethane I 75-52-5 

1-Nitropropane I 108-03-2 

2-Nitropropane I 79-46-9 

N-Nitrosodimethylamine; I 

see 1910. 1016 1 
Nitrotoluene J_ 

(all isomers ) I 

o-isomer I 88-72-2 

m-isomer I 99-08-1 

p-isomer I 99-99-0 

Nitrotrichlorome thane; J_ 

see Chloropicrin I 

Nonane I 111-84-2 

Octachloronaphthalene. . I 2234-13-1 

1 

Octane I 111-65-9 

I 

Oil mist, mineral I 8012-95-1 

Osmium tetroxide J_ 

(as Os) I 20816-12-0 

Oxalic acid I 144-62-7 

I 

Oxygen difluoride I 7783-41-7 

Ozone I 10028-15-6 



I 0. 02 ppm (C) 1 

1 ..^^^.^^^^^ 1 

1 1 

1 1 

1 5 mg/m^ TWA 1 

1 1 

I 15 mg/m' TWA 1 

1 5 mg/m' TWA 1 

1 1 

1 2 ppm TWA 1 

1 1 

1 1 

1 2^ ppm TWA 1 

1 1 

1 100 ppm TWA 1 

1 10 ppm TWA 1 

i 1 

1 1 

1 1 

1 1 

1 1 

I 0. 001 ppm TWA I 

1 1 

1 1 

1 1 mq/m^ TWA 1 

1 1 

1 1 mq/m' TWA 1 
10.5 mg/m^ TWA I 

1 2 ppm TWA 1 

1 1 

1 25 ppm TWA 1 

1 6 mg/m' TWA 1 

1 1 ppm TWA 1 

1 1 mq/m' TWA 1 

1 1 

1 1 

1 100 ppm TWA 1 

1 5 ppm (C) 1 

1 10 ppm TWA 1 

1 1 mg/m^ (C) 1 

1 100 ppm TWA 1 

1 25 ppm TWA 1 

1 25 ppm TWA 1 

1 1 

1 i 

1 i 

1 1 

1 5 ppm TWA 1 

1 1 

1 1 

1 i 

1 1 

1 1 

10.1 mq/m^ TWA I 

1 1 

1 500 ppm TWA 1 

1 1 

1 5 mg/m' TWA 1 

1 1 

1 1 

1 1 mg/m^ TWA 1 

1 1 

I 0. 05 ppm TWA 1 
10.1 ppm TWA 1 
1 1 



0. 


.2 ppm (C) 


1 




5 


mq/m^ TWA 


1 
1 
1 




5 


mg/m^ TWA 


1 
1 




10 


mg/m=' TWA 


1 




5 


mq/m^ TWA 


1 




0_ 


.25 mg/m' TWA 


1 




0_ 


. 5 ppm TWA 


1 
1 
1 


X 


20 


ppm TWA 


1 


X 


30 


ppm STEL 


1 




100 


ppm TWA 


i 




10 


ppm TWA 


1 




15 


ppm STEL 


1 
1 
1 
1 
1 




0. 


001 ppm TWA 


1 
1 
1 




1 


mg/m* TWA 


1 
1 




0_ 


1 mg/m^ TWA 


1 




0_ 


5 mg/m^ TWA 


1 


X 


2 


ppm TWA 


1 




4 


ppm STEL 


1 




25 


ppm TWA 


1 




3 


mq/m' TWA 


1 


X 


i 


ppm TWA 


1 


X 


1 


mq/m' TWA 


1 
1 
1 


X 


100 


ppm TWA 


1 




1 


ppm STEL 


1 




10 


ppm TWA 


1 




0_ 


1 mq/m^ STEL 


1 


X 


100 


ppm TWA 


1 




25 


ppm TWA 


1 




10 


ppm TWA 


1 
1 
1 
1 
1 




2 


ppm TWA 


1 
1 
1 
1 
1 


X 


200 


ppm TWA 


1 




0_ 


1 mg/m' TWA 


1 


X 


0_ 


3 mg/m^ STEL 


1 




300 


ppm TWA 


1 




375 


ppm STEL 


1 




5 


mg/m^ TWA 


1 
1 







006 mq/m^ STELI 




1 


mg/m^ TWA 


1 






mq/m^ STEL 


1 




0_ 


05 ppm (C) 


1 




0_ 


1 ppm TWA 


1 







3 ppm STEL 


1 





1814 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



4685- 


-14- 


-7 


1910- 


-42- 


-5 


2074- 


-50- 


9 


56- 


-38- 


-2 



Paraffin wax fume I 8002-74-2 

Paraquat, respirable 1 

dust I 

1 
1 

Parathion I 

Particulates not J_ 

otherwise regulated _L 

(PNOR) (f ) I 

Total dust I 

Respirable fraction . . I 
PCB; see Chlorodiphenvl I 

(42% and 54% 1 

chlorine) ■ I 

Pentaborane I 19624-22-7 

I 

Pentachloronaphthalene ■ I 1321-64-8 

Pentachlorophenol I 87-86-5 

Pentaervthritol I 115-77-5 

Total dust I 

Respirable fraction. . I 
Pentane I 109-66-0 

I 

2-Pentanone (Methyl 1 107-87-9 

propyl ketone ) I 

Perchloroethylene J_ 

(Tetrachloroethylene) I 127-18-4 
Perchloromethyl J. 

mercaptan I 594-42-3 

Perchloryl fluoride. . . . I 7616-94-6 

I 

Perlite I 93763-70-3 

Total dust I 

Respirable fraction. . I 
Petroleum distillates J_ 

(Naphtha) (Rubber 1 

Solvent) I 

Phenol I 

Phenothiazme I 

p-Phenylene diamine . . . . I 
Phenyl ether, vapor . . . . I 
Phenyl e t he r-bi phenyl J_ 

mixture, vapor I 

Phenylethylene; J_ 

see Styrene I 

Phenyl qlycidyl ether J_ 

( PGE ) I 122- 60-1 

Phenylhydrazine I 

1 

Phenyl mercaptan I 

Phenylphosphine J_ 

Phorate (Thimet) I 

I 

Phosdrin (Mevinphos) . . . I 

I 

Phosgene ( Carbonyl J_ 

chloride) I 

Phosphme I 

1 

Phosphoric acid I 

I 

Phosphorus ( yellow) . . . . | 
Phosphorus oxychloride . I 
Phosphorus _|_ 



8002- 


-05- 


-9 


108- 


-95- 


-2 


92- 


-84- 


-2 


106- 


-50- 


-3 


101- 


-84- 


-8 



100- 


-63- 


-0 


108- 


-98- 


-5 


638- 


-21- 


-1 


298- 


-02- 


-2 


7786- 


-34- 


-7 


75- 


-44- 


-5 


7803- 


-51- 


-2 


7664- 


-38- 


-2 


7723- 


-14- 


-0 


10025- 


-87- 


-3 



1 1 

1 1 

10.5 mg/m^ TWA I 
1 1 

1 1 

10.1 mq/m^ TWA I 

1 1 

1 1 

1 1 

I 15 mg/m^ TWA 1 

1 5 mg/m' TWA 1 

1 1 

1 1 

i 1 
I 0. 005 ppm TWA I 

1 1 

10.5 mq/m^ TWA I 
10.5 mq/m' TWA I 

1 1 

I 15 mq/m^ TWA 1 
1 5 mq/m^ TWA 1 
I 1000 ppm TWA 1 

1 1 

1 200 ppm TWA 1 
1 1 

1 1 

1 Table Z-2 1 

1 1 

1 0. 1 ppm TWA 1 

1 3 ppm TWA 1 

1 1 

1 1 

I 15 mq/m^ TWA 1 

1 5. mq/m' TWA 1 

1 1 

1 1 

1 500 ppm TWA 1 

1 5 ppm TWA 1 

1 1 

10.1 mq/m^ TWA I 

1 i ppm TWA 1 

1 1 

1 i ppm TWA 1 

1 1 

1 1 

1 1 

1 10 ppm TWA 1 

1 5 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

10.1 mq/m" TWA I 
1 1 

1 1 

1 0. 1 ppm TWA 1 

1 0. 3 ppm TWA 1 

1 1 

1 1 mq/m" TWA 1 

1 1 

10.1 mq/m^ TWA I 

1 1 

1 1 



2 


mq/m' TWA 


1 
i 




0_ 


1 mq/m' TWA 


1 
i 
1 


X 


0_ 


1 mg/m' TWA 


1 
1 
1 
1 


X 


15 


mq/m^ TWA 


1 




5 


mq/m^ TWA 


1 
1 
1 
1 




0_ 


00 5 ppm TWA 


1 




0_ 


015 ppm STEL 


i 




0_ 


5 mq/m^ TWA 


1 


X 


0_ 


5 mq/m^ TWA 


1 
1 


X 


iO 


mq/m^ TWA 


1 




5 


mq/m^ TWA 


1 




600 


ppm TWA 


1 




750 


ppm STEL 


1 




200 


ppm TWA 


1 




250 


ppm STEL 


1 
1 




25 


ppm TWA 


1 
1 




0_ 


1 ppm TWA 


1 




3 


ppm TWA 


1 




6 


ppm STEL 


1 
1 




15 


mq/m' TWA 


1 




5 


mq/m^ TWA 


1 
1 
1 




400 


ppm TWA 


1 




5 


ppm TWA 


1 


X 


5 


mq/m' TWA 


1 


X 


0_ 


1 mq/m^ TWA 


1 


X 


1 


ppm TWA 


1 
1 




1 


ppm TWA 


1 
i 
i 
1 




1 


ppm TWA 


1 




5 


ppm TWA 


1 


X 


10 


ppm STEL 


1 




0_ 


5 ppm TWA 


1 




0_ 


5 ppm (C) 


1 







05 mq/m^ TWA 


1 


X 


0_ 


2 mq/m' STEL 


1 




0_ 


1 m.q/m=' TWA 


1 


X 


0_ 


3 mq/m^ STEL 


1 
1 




0_ 


1 ppm TWA 


1 




0. 


3 ppm TWA 


1 




1 


ppm STEL 


1 




1 


mq/m-' TWA 


1 




3 


mq/m' STEL 


1 




0_ 


1 mq/m^ TWA 


1 




0_ 


1 ppm TWA 


1 
1 





10.16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1815 



PROPOSED RULES 



pentachloride 


■ 1 


10026- 
1314- 

7719- 

85- 


-13- 
-80- 

-12- 

-44- 


-8 


PhosDhorus oentasulfid 


el 

. i 


il 


Phosphorus trichloride 


. 1 


-2_ 


Phthalic anhydride.... 


Jl 


-9 


jn-Phthalodinitrile. . . . 


■ 1 


626- 

1918- 


-17- 
-02- 


-5 


Picloram 


. 1 


-1 


Total dust 


A. 






^ 








Picric acid 


A 


88- 


-89- 


-1 


Pindone ( 2-Pivalvl- 1 , 


1 








3-indandione ) 


■ 1 


83- 


-26- 


-1 




1 




chloride 


1 


142- 


-64- 


-3 


Plaster of paris 


A 


26499- 


-65- 


-0 


Total dust 


A. 








Respirable fraction. 


^ 








Platinum (as Pt) 


A 


7440- 


-06- 


-4 


Metal 


■ 1 








Soluble Salts 


A 




Portland cement 


A. 


65997- 


-15- 


-1 


Total dust 


A. 








Respirable fraction. 


A 








Propane 


. 1 


74- 
107- 


-98- 
-19- 


-6 


Proparavl alcohol 


A 


-_!_ 


Propionic acid 


A 


79- 


-09- 


-4 


Propoxur 


. 1 


114- 

57- 

109- 

71- 
627- 


-26- 

-57- 
-60- 

-23- 

-13- 


-1 


beta-Propiolactone; 


1 

■ 1 




see 1910. 1013 


-8 


n-Propvl acetate 


J. 


-A 


n-Propvl alcohol 


A. 


-A 


n-Propvl nitrate 


A. 


-4 




1 
A. 

. 1 


78- 


-87- 




Propylene dichloride.. 


:5 


Propylene qlycol 


1 








dmitrate 


1 
1 


6423- 


-43- 


-4 


Propylene qlycol mono- 




methyl ether 


J. 


107- 
75- 


-98- 
-55- 


-7 






Propylene imme 


A. 


-8 


Propylene oxide 


A 


75- 


-56- 


-9 


Propyne; see Methyl 


1 








acetylene 


. 1 


8003- 
110- 
106- 


-34- 
-86- 
-51- 




Pyrethrum 


. 1 


-7 


Pyridine 


J. 


-1 


Ouinone 


_L 


-4 


RDX: see Cyclonite . . . . 


:.L 




Resorcmol 


1 
1 


108- 


-46- 


A 


Rhodium (as Rh) , metal 


1 








fume and insoluble 


1 








compounds 


. 1 


7440- 


-16- 


-6 


Rhodium (as Rh) , 


1 




soluble compounds. . . 


. 1 


7440- 

299- 

83- 


-16- 
-84- 
-79- 


-6 


Ronnel 


J. 


-3 


Rotenone 


J. 


-4 


Rouqe 


_L 




Total dust 


. 1 




Respirable fraction. 


. 1 




Selenium compounds 


1 




(as Se) 


■ 1 


7782- 


-49- 


- ^ 



1 1 mq/m' TWA 1 
1 1 mq/m^ TWA 1 

1 1 

1 0. 5 ppm TWA 1 

1 1 

1 2 ppm TWA 1 

1 1 

1 1 

I 15 mq/m-' TWA 1 
1 5 mq/m^ TWA 1 

10.1 mq/m^ TWA I 

1 1 

10.1 mq/m^ TWA I 

1 1 

1 1 

1 1 

I 15 mq/m^ TWA 1 
1 5 mq/m^ TWA 1 

1 1 

1 1 

I 0. 02mq/m^TWA| 

1 1 

I 15 mq/m^ TWA 1 

1 5 mq/m^ TWA 1 

I 1000 ppm TWA I 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 200 ppm TWA 1 

1 1 

1 200 ppm TWA 1 

1 1 

1 25 ppm TWA 1 

1 1 

1 75 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 2 ppm TWA 1 

1 100 ppm TWA 1 

1 1 

i 1 

1 5 mq/m^ TWA 1 

J_ 5. ppm TWA 1 

1 0. 1 ppm TWA 1 

1 1 

1 1 

1 1 

1 1 

1 1 

10.1 mq/m' TWA I 

1 1 

I ■ OOlmq/m'TWAI 
I 15 mq/m' TWA 1 
1 5 mq/m' TWA 1 

1 1 

I 15 mq/m' TWA 1 
1 5 mq/m' TWA 1 

1 1 

10.2 mq/m' TWA I 



1 
1 
3 

0_ 
0_ 
i 
5 

10 
5 
0_ 

0_ 
5 

5 



mq/m^ TWA 
mq/m' TWA 
mq/m^ STEL 
A ppm TWA 
A ppm STEL 
ppm TWA 
mq/m' TWA 

mq/m' TWA 
mq/m^ TWA 
A mq/m^ TWA 

J^ mq/m^ TWA 

mq/m^ TWA 

mq/m^ TWA 
mq/m' TWA 



1 mq/m 





TWA 
002 mq/m' TWA 



10 mq/m' TWA 
5 mq/m' TWA 
000 ppm TWA 
i ppm TWA 

10 ppm TWA 
0. 5 mq/m' TWA 



200 
250 
200 
250 

2A 
40 

21 

110 



ppm 
ppm 
ppm 
ppm 
ppm 
ppm 
ppm 
ppm 



TWA 

STEL 

TWA 

STEL 

TWA 

STEL 

TWA 

STEL 



0. 05 ppm TWA 



100 

150 

2 

20 



5 
5 

0_ 

10 
20 



ppm TWA 
ppm STEL 
ppm TWA 
ppm TWA 



mq/m' TWA 
ppm TWA 
A ppm TWA 

ppm TWA 
ppm STEL 



0. 1 mq/m' TWA 

0. 001 mq/m' TWA 
10 mq/m' TWA 
5 mq/m' TWA 

10 mq/m' TWA 
5 mq/m' TWA 

0.2 mq/m' TWA 



1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
± 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 



1816 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Selenium hexafluoride J_ 

(as Se) I 7783-79-1 

Silica, amorphous, ]_ 

precipitated and gel. I 112926-00-8 
Silica, amorpous, J. 

diatomaceous earth, j_ 

containing less than J_ 

1% crystalline silical 61790-53-2 
Silica, crystalline J. 

cristobalite, J_ 

respirable dust I 14464-46-1 

Silica, crystalline J_ 

quartz, respirable 1 

dust I 14808-60-7 

Silica, crystalline J_ 

tripoli (as guartz) , 1 

respirable dust I 1317-95-9 

Silica, crystalline J_ 

tridymite, j_ 

respirable dust I 15468-32-3 

Silica, fused, J_ 

respirable dust I 60676-86-0 

Silicates ( less than 1% I 

crystalline silica ) J_ 

Mica ( respirable J_ 

dust) I 12001-26-2 

Soapstone, total dust I 

Soapstone, respirable I 

dust I 

Talc (containing J_ 

asbestos ) : use J_ 

asbestos limit : see J_ 

29 CFR 1910. 1001 I 

Talc (containing no J_ 

asbestos ) , _L 

respirable dust I 14807-96-6 

Tremolite, J_ 

asbestif orm; see _L 

1910.1001 I 

Silicon I 7440-21-3 

Total dust I 

Respirable fraction . . I 
Silicon carbide I 409-21-2 

Total dust I 

Respirable fraction . . I 
Silicon tetrahydride. . . I 7803-62-5 
Silver, metal and J_ 

soluble compounds J_ 

(as Ag) I 7440-22-4 

Soapstone; J_ 

see Silicates I 

Sodium azide I 26628-22-8 

(as HNJ 1 

(as NaN , ) 1 

Sodium bisulfite I 7631-90-5 

Sodium f luoroacetate. . . I 62-74-8 

I 

Sodium hydroxide I 1310-73-2 

Starch I 9005-25-8 

Total dust I 

Respirable fraction . . I 

Stibine I 7803-52-3 

Stoddard solvent I 8052-41-3 

Strychnine I 57-24-9 



1 1 

I 0. 05 ppm TWA 1 

1 1 

1 Table Z-3 1 

1 1 

1 1 

1 1 

1 Table Z-3 1 

1 1 

1 1 

1 Table 2-3 1 

1 1 

1 1 

1 Table Z-3 1 

1 1 

1 1 

1 Table Z-3 1 

1 1 

1 1 

1 Table Z-3 1 

1 1 

1 Table Z-3 1 

1 i 

1 1 

1 1 

1 1 

1 Table Z-3 1 

1 1 

1 Table Z-3 1 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 
1 Table Z-3 1 

1 1 

1 1 

1 1 

i 1 

I 15 mg/m^ TWA 1 
1 5 mg/m' TWA 1 

1 1 

I 15 mg/m^ TWA 1 
1 5 mg/m" TWA 1 
1 1 

1 1 

1 1 

10.01 mg/m'TWAI 

1 1 

1 1 

1 1 

1 1 

1 1 

1 1 

I ■ 05 mg/m'TWAI 
1 1 

1 2 mg/m" TWA 1 

1 1 

I 15 mg/m' TWA 1 
1 5 mg/m^ TWA 1 
1 0. 1 ppm TWA 1 
1 500 ppm TWA 1 
10.15 mg/m^TWAI 





1 


0. 05 ppm TWA 


i 




1 


6 mg/m^ TWA 


1 




1 




1 




1 


6 mq/m^ TWA 


i 




1 




1 


0. 05 mg/m' TWA 


i 




1 




1 


0. 1 mq/m^ TWA 


i 




1 




1 


. 1 mq/m^ TWA 


1 




1 




1 


0.05 mq/m^ TWA 


1 




1 


. 1 mq/m^ TWA 


i 




1 




1 




1 


3 mg/m^ TWA 


1 


6 mg/m^ TWA 


1 




1 


3 mg/m^ TWA 


1 




1 




1 




1 




1 




i 




1 


2 mg/m^ TWA 


1 




1 




1 




1 




1 


10 mg/m^ TWA 


1 


5 mg/m' TWA 


1 




i 


10 mq/m^ TWA 


1 


5 mg/m^ TWA 


1 


5 ppm TWA 


1 




1 




1 


0.01 mg/m' TWA 


1 




1 




1 




1 


0.1 ppm (C) 


1 X 


0. 3 mg/m^ (C) 


1 X 


5 mg/m' TWA 


1 


0.05 mg/m^ TWA 


1 X 


0. 15 mq/m^ STEL 


1 X 


2 mg/m^ (C) 


1 




1 


15 mg/m^ TWA 


1 


5 mg/m-' TWA 


i 


. 1 ppm TWA 


i 


ppm TWA 


1 


0.15 mg/m^ TWA 


1 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1817 



PROPOSED RULES 

100-42-5 1 100 ppm TWA 1 50 

1 200 ppm (C) 1 100 
57-50-1 1 1 

I 15 mq/m^ TWA 1 15. 

1 5 mq/m^ TWA 1 5 

7446-09-5 1 5 ppm TWA 1 5 

1 1 5 

2551-62-4 I 1000 ppm TWA I 1000 

7664-93-9 1 1 mq/m^ TWA 1 1 

10025-67-9 1 1 ppm TWA 1 1 

5714-22-7 I 0. 025 ppm TWA I 0^ 

7783-60-0 1 1 0^ 

2699-79-8 1 5 ppm TWA 1 5 

1 1 10 

35400-43-2 1 1 1 

1 i 

1 1 

1 1 

93-76-5 I 10 mq/m^ TWA 1 iO 

1 1 

1 1 

7440-25-7 1 5 mq/m^ TWA 1 5 
3689-24-5 10.2 mq/m^ TWA I 0^ 

1 1 

13494-80-9 10.1 mq/m^ TWA I 0^ 

1 1 

7783-80-4 I 0. 02 ppm TWA 1 0^ 
3383-96-8 1 1 

I 15 mq/m' TWA 1 10 
1 5 mq/m' TWA 1 5 

1 1 

107-49-3 I 0. 05 mq/m^TWAI 0^ 
26140-60-3 1 i ppm (C) I 0^ 

1 1 

76-11-9 1 500 ppm TWA 1 500 

1 1 

76-12-0 1 500 ppm TWA 1 500 

1 1 

79-34-5 1 5 ppm TWA J. i 

1 1 

1 i 

1 i 

1 1 

1335-88-2 1 2 mq/m^ TWA 1 2 
78-00-2 I 0. 075mq/m'TWAI 0^ 

109-99-9 1 200 ppm TWA 1 200 
1 1 250 

1 1 

75-74-1 I 0. 075mq/m^TWAI 0_. 

1 1 

3333-52-6 1 0. 5 ppm TWA 1 0_. 
509-14-8 1 1 ppm TWA 1 i 

1 1 

7722-88-5 1 1 5 

1 1 

1 1 

479-45-8 11.5 mq/m'TWA 1 1^ 

1 1 

7440-28-0 10.1 mq/m^TWA 1 0^ 

1 1 

96-69-5 1 1 

I 15 mq/m^ TWA 1 10 

1 5 mq/m' TWA 1 5 

68-11-1 1 1 1 

7719-09-7 1 1 1 



Stvrene I 

I 

Sucrose I 

Total dust I 

Respirable fraction. . I 
Sulfur dioxide I 

I 

Sulfur hexaf luoride . . . . I 

Sul f uric acid I 

Sulfur monochloride ■ ... I 
Sulfur pentaf luoride. . . I 
Sulfur tetrafluoride. . . I 

Sulf uryl fluoride I 

I 

Sulprof OS I 

Svstox; see Demeton ... I 
2,4, 5-T (2, 4, 5-tri- 1 

chlorophenoxyacetic J_ 

acid) I 

Talc; see Silicates ... I 
Tantalum, metal and J_ 

oxide dust I 

TEDP (Sulfotep) I 

Tellurium and J_ 

compounds ( as Te ) . . . . I 
Tellurium hexaf luoride _[_ 

(as Te) I 

Temephos I 

Total dust I 

Respirable fraction . . I 
TEPP (Tetraethyl 1 

pyrophosphaate ) I 

Terphenyls I 

1.1.1, 2-Tetrachloro- 1 
2 , 2-dif luoroethane . . . 1 

1.1.2, 2-Tetrachloro- 1 
1, 2-difluoroethane. . . . I 

1, 1, 2, 2-Tetrachloro- 1 

ethane ! 

Tetrachoroethylene; J_ 
see Perchloroethylene I 
Tetrachlorome thane; see | 
Carbon tetrachloride. I 
Tetrachloronaphthalene . I 
Tetraethyl lead (as Pb ) I 
Tetrahydrof uran I 

I 

Tetramethyl lead, J_ 
(as Pb) I 

Tetramethyl J_ 

succinonitrile | 

Tetranitromethane | 

Tetrasodium J_ 

Pyrophosphate | 

Tetryl (2,4, 6-Trinitro- I 
phenylmethyl- J_ 
nitramme) I 

Thallium, soluble J_ 
compounds ( as Tl ) . . . . I 

4, 4 '-Thiobis (6-tert- 1 

Butyl-m-cresol ) | 

Total dust I 

Respirable fraction. . I 

Thioqlycolic acid I 

Thionyl chloride I 



ppm TWA 
ppm STEL 

mq/m^ TWA 
mq/m' TWA 
ppm TWA 
ppm STEL 
ppm TWA 
mq/m' TWA 
ppm TWA 
001 ppm (C 
J, ppm (C) 
ppm TWA 
ppm STEL 
mq/m^ TWA 



mq/m^ TWA 

mq/m^ TWA 
2, mq/m' TWA 

X mq/m' TWA 

02 ppm TWA 



mq/m^ TWA 
mq/m^ TWA 

05 ppm TWA 
_5 ppm (C) 

ppm TWA 

ppm TWA 

ppm TWA 



mq/m^ TWA 
075 mq/m" TWA 
ppm TWA 
ppm STEL 



075 mq/m" TWA 

_5 ppm TWA 
ppm TWA 

mq/m- TWA 



5. mq/m^ TWA 
1 mq/m^ TWA 



mq/m^ TWA 
mq/m^ TWA 
ppm TWA 
ppm (C) 



X 



X 



1 

1 

1 

1 

i 

1 

i 

1 

i 

1 

i 

1 

1 

1 

1 

i 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 

1 X 

i 

1 

1 

1 

1 X 

1 X 

i 
1 
1 

1 X 

1 

1 X 

1 
1 
i 
1 
1 

1 X 

1 

1 X 

1 
1 

1 
i 

1 X 

1 



1818 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Thiram ■ I 137-26-8 

Tin, inorganic J_ 

compounds (except J. 

oxides) (as Sn) I 7440-31-5 

Tin, organic compounds J_ 

(as Sn) I 7440-31-5 

Tin oxide I 7440-31-5 

Titanium dioxide I 13463-67-7 

Total dust I 

Respirable fraction. J_ 

Toluene I 108-88 

I 

Toluene-2, 4- 1 

diisocvanate (TDD ... I 584-84-9 

1 

m-Toluidine I 108-44-1 

o-Toluidine I 95-53-4 

p-Toluidine I 106-49-0 

Toxaphene; see J_ 

Chlorinated camphene . I 
Tremolite; j_ 

see Silicates I 

Tributyl phosphate I 126-73-8 

Trichloroacetic acid. . . I 76-03-9 

1, 1, 1-Trichloroethane; J_ 
see Methyl chlorof ormi 

1,1, 2-Trichloroethane. . I 79-00-5 
Trichloroethvlene I 79-01-6 

I 

Trichlorome thane; J_ 

see Chloroform J_ 
Trichloronaphthalene. . . I 1321-65-9 
1,2, 3-Trichloropropane. I 96-18-4 
1,1, 2-Trichloro-l, 2, 1 

2-trif luoroethane ■ ... I 76-13-1 

1 

Triethylamme I 121-44-8 

I 

Trif luorobromomethane . . I 75-63-8 

Trimellitic anhydride. . I 552-30-7 

Trimethylamme I 75-50-3 

I 

Trimethyl benzene I 25551-13-7 

Trimethyl phosphite. ... I 121-45-9 
2, 4, 6-Trinitrophenyl; 1 

see Picric acid I 

2,4, 6-Trinitrophenyl- J. 

methyl nitramme; J_ 

see Tetryl I 

2, 4, 6-Trinitrotoluene J_ 

(TNT) I 113-96-7 

Triorthocresyl J_ 

phosphate I 

Triphenyl amine I 

Triphenyl phosphate .... I 
Tungsten Compounds J_ 

(as W) I 

( insoluble ) J_ 

1 
(Soluble) I 

1 

Turpentine I 8006-64-2 

Uranium (as U) I 7440-61-1 

Soluble compounds . . . . I 



78- 


-30- 


-8 


603- 


-34- 


-9 


115- 


-86- 


-6 


7440- 


-33- 


-7 



1 5 mg/m^ TWA 1 5 
1 1 

i 1 

1 1 2 

1 1 

10.1 mg/m^ TWA I 0. 
1 1 2 

1 1 

I 15 mg/m^ TWA 1 iO 
I 5 mg/m^ TWA I 5 mg 
-_3 1 Table Z-2 1 1 

1 1 150 

1 1 
I 0. 02 ppm (C) 1 0. 

1 10 

1 1 2 

J_ 5 ppm TWA 1 5 

1 1 2 

1 1 

1 1 

1 1 

1 i 

1 5 mg/m^ TWA 1 2 

1 1 1 

1 1 

1 1 

1 10 ppm TWA 1 10 

1 100 ppm TWA 1 50 

1 200 ppm (C) 1 200 

1 1 

1 1 

1 5 mg/m^ TWA 1 5 

1 50 ppm TWA 1 iO 

1 1 

I 1000 ppm TWA I 1000 

1 I 1250 

1 25 ppm TWA 1 iO 

1 1 15 

I 1000 ppm TWA I 1000 

1 1 0. 

1 1 10 

1 1 15 

1 1 25 

1 1 2 

1 1 

1 ± 

1 ± 

1 1 

1 1 

1 1 

11.5 mg/m^TWA 1 0. 

1 1 
10.1 mg/m' TWA I 0. 

1 1 5 

1 3 mg/m^ TWA 1 3 

i 15 

1 1 

1 1 5 

1 1 10 

1 1 1 

1 1 3 

1 100 ppm TWA 1 100 

1 1 

10.05 mg/m^TWAI 



mg/m' TWA 



2 mg/m^ TWA 

J, mg/m^ TWA 
mg/m^ TWA 

mg/m^ TWA 
/m' TWA 



00 ppm TWA 
ppm STEL 

005 ppm TWA 



■ 02 ppm STEL 
ppm TWA 
ppm TWA 
ppm TWA 



. 5 mg/m^ TWA 



1 ppm TWA 



ppm TWA 

ppm TWA 
ppm STEL 



5 mg/m" TWA 
ppm TWA 



ppm TWA 
ppm STEL 
ppm TWA 
ppm STEL 
ppm TWA 
005 ppm TWA 



ppm TWA 
ppm STEL 
ppm TWA 
ppm TWA 



^ mg/m^ TWA 

^ mg/m' TWA 
mg/m^ TWA 
mg/m^ TWA 
mg/m' TWA 

5 mg/m^ TWA 
mg/m^ STEL 
mg/m' TWA 
mg/m^ STEL 
ppm TWA 

05 mg/m' TWA 



1 
1 
1 
1 
1 

1 X 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 
1 X 
1 X 

± 
1 
1 
1 
1 
1 
1 
1 

1 X 

1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 

1 X 

1 

1 X 

1 
1 
1 
1 
1 
1 
i 
1 
1 
1 
1 



10.16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1819 



PROPOSED RULES 



Insoluble compounds . . I 
I 



n-Valeraldehvde . 



Vanadium 

Respirable dust 

(as V-.O, ) 

Fume (as V,O J . . . 



1 
1 



Vegetable oil mist . 
Total dust 



Respirable fraction . 
Vinyl acetate 



Vinyl benzene; 
see Stvrene . 



Vinyl bromide . 



Vinyl chloride; 
see 1910. 1017. 



VM&P Naptha. 



Warfarin . 



all soft and hard ^ 
woods except Western 
red cedar 



Zinc chloride fume . 



Zinc chromate 
(as CrO , ) ■ ■ 



Zinc oxide fume . 



Zinc oxide . 



Total dust . 



Respirable fraction . 
Zinc stearate 



Total dust. 



Respirable fraction . 
Zirconium compounds 
(as Zr) 



1 



Vinyl cyanide; J_ 

see Acrylonitrile J_ 

Vinyl cyclohexene J_ 

dioxide I 



Vinylidene chloride 

(1, 1-dichloroethylene) 
Vinyl toluene 



Welding fumes 

(Total particulate ) 
Wood dust 



Wood dust, allergenic 

(Western Red Cedar) . . . 
ffi-Xvlene- alpha, alpha' , 
diamine 



10 
1 
110-62-3 1 
1314-62-1 1 
1 
1 
1 
1 
J_l 

1 

108-05-4 1 

1 
i 
1 

593-60-2 1 

1 

75-01-4 1 

1 

1 

1 

106-87-6 1 

1 

75-35-4 1 

25013-15-4 1 

1032-32-4 1 

1 

81-81-2 10 



. 25mg/m' TWA I 0.2 mg/m^ TWA 



Xylenes 

(0-, m- , p-isomers) 


1 
• • 1 


1 


Xylidine 1 


yttrium 1 



. 5 ppm 

■ 1 ppm 



1 
1 
1 
1 

(C) I 
(C) I 

1 

TWA 1 



0. 6 mg/m' STEL 
50 ppm TWA 



(C) 



_5 mg/m- i wrt _[_ 
5 mg/m ^ TWA 1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 



■ 5 ppm 
■ 1 ppm 



15 mg/m' TWA 
5 mg/m^ TWA 
10 ppm TWA 
20 ppm STEL 



5 ppm TWA 



10 ppm TWA 



I ppm TWA 
100 ppm TWA 
300 ppm TWA 

_ 400 ppm STEL 

1 mg/m' TWA I 0. 1 mg/m' TWA 



± 

100 ppm TWA 1 

1 

1 



NONE 



NONE 



1 

■J. 
1 



1 
1 
1 
1 

1 
i 
1 
i 
1 
1477-55-0 1 

i 
1330-20-7 1 

1 

1300-73-8 1 
7440-65-5 1 
7646-85-7 1 

1 

varies with I 
compound J_ 
1314-13-2 11 

1 
1314-13-2 1 

J_l 

1 

557-05-1 1 

1 
i 

7440-67-7 1 

1 



1 
1 
1 
i 
i 
1 
1 
1 
1 
1 

1 

1 

100 ppm TWA 1 

1 

5 ppm TWA 1 
1 mg/m^ TWA 1 
1 mg/m^ TWA 1 

1 

1 
Table Z-2 1 
mg/m^ TWA 1 

1 

1 



5 mg/m" TWA 



5 mg/m^ TWA 
10 mg/m^ STEL 

2 ■ 5 mg/m' TWA 

0. 1 mg/m' (C 



1 



5_ mq/m' TWA 1 
5 mg/m^ TWA 1 

1 

5_ mg/m^ TWA 1 10 
5 mg/m' TWA 1 

1 



100 ppm TWA 

150 ppm STEL 

2 ppm TWA 

1 mg/m^ TWA 

1 mg/m^ TWA 

2 mg/m' STEL 

0. 1 mg/m^ (C) 

5 mg/m^ TWA 

10 mg/m^ STEL 

10 mg/m^ TWA 

5 mg/m^ TWA 



10 mg/m-' TWA 
5 mg/m^ TWA 



5 mg/m' TWA J_ 
1 



5 mg/m^ TWA 
10 mg/m^ STEL 



1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
i 
1 
1 
1 
1 
1 
1 
i 
i 
1 
1 
1 
1 
1 
1 
1 
1 
i 
1 
1 
1 
1 



Chomioal Name 



"RESPIRATORY EFFECTS 

CAS No. 



4iefc 



1820 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



Aluminum 



7 4 29 90 5 



15 mg/m ^ TWA Total Dust 



Bismuth tollurid e , Undop e d 



Chlorine dioxido 



Chromium metal (ao Cr) 



Coal Du8t (<5% quartz) 



Reap, fraction 



Coal Dust (>5% quartz) 



Roopirabl e quartz fraotion 
Ethyl aerylato 



Forrovonadium duot 



Grain Dust (oat,whoat,barloy) 



Graphite, natural, 



Roop. Duot 



Indium & oompoundo (ao In) 
Iron oxido (dust & fumo) 



Mothylono bis 



1301 8 2 1 



100 4 9 4 4 



7-1-10 17 3 



None 



Non e 



110 8 8 5 



12604 5 8 9 



Nono 



7782 4 2 5 



7110 71 6 



1309 37 1 



512 4 30 1 



5 mg/m ^ TWA Reop. fraotion 



15 mg/m * TWA Total Duot 



5 mg/m '^ TWA Rosp. fraction 
0.1 ppm TWA 



0.3 ppm STEL 
1 mg/m * T\ ^^ ^\ 



2 mg/m ^ TWA 



0. 1 mg/m ^ TWA 



5ppm TWA 



25 ppm STEL, Sk ia 



1 mg/m ^ TWA 



3 mg/m * STEL 



10 mg/m ^ TWA 



2.5 mg/m ^-^FWA 



0. 1 mg/m ^ TWA 



10 mg/m ^ TWA 



0.01 ppm Coiling, Skin 



(1 Cyohlohoxylioooyonat e ) 

Mica, Rospirablo Dust 



Nitrog e n dioxid e 



Oxygon difluorido 



Ozon e 



Paraquat, Rospirablo Dust 
SilioQ, or>'Btallin e 



oriotobalit e , R e spirabl e Dust 



Silioa. or^'stallino quartz, 
Rospirablo Dust 



Silioa, orystallin e 

tridymit e , R e spirable Duot 

Silioa, orystallino tripoli 



(as quartz) Rospirablo Dust 

Silioa, fuood 



Rospirablo Dust 

Soapstono. total dust 



Soapotono. Reopirablo Duot 
Sulfur dioxid e 



Sulfur totrafluorido 



Talc (containing no aob e otos) 



R e spirable Duot 



Tin oxido (as Sn) 

Trimollitic anhydride 



Wood dust, hard 



Wood dust, soft 



12001 26 2 



10102 11 - 



77 8 3 4 1 7 



1002 8 15 6 



4 685 1 4 7 



11161 16 1 



1 48 08 60 7 



1516 8 32 3 



1317 95 9 



60676 8 6 



Nono 



Non e 



7116 09 5 



77 8 3 60 



11 8 07 96 6 



7 44 3 1 5 



552 30 7 



Non e 



Nono 



3 mg/m ^ TWA 



1 ppm ST fifc 



0.05 ppm Coiling 



0. 1 ppm TWA 



0.3 ppm STEL 

0. 1 mg/m ^ TWA, Skin 



0.05 mg/m ^ TWA 



0. 1 mg/m ^ TWA 



0.05 mg/m ^-T^WA 



0. 1 mg/m ^ TWA 



0. 1 mg/m * TWA 



6 mg/m ^ TWA 

-t I 1 m-i r . 



3 mg/m ^ TW^A 



2 ppm TWA 
5 ppm STEL 
0. 1 ppm Coiling 
2 mg/m ^ TWA 



2 mg/m ^ TWA 



0.005 ppm TWA 
5 mg/m ^ TWA 



10 mg/m * STEL 
5 mg/m ^ TWA 



10 mg/m ^ STEL 



10:16A 



NORTH CAROLINA REGISTER 



November 15, 1995 



1821 



PROPOSED RULES 



Wood dust, allorgonio 



(W e st e rn Rod Codar) 



Nono 



AVOroANCE OF CANCER 



2.5 mg/m ^ TWA 



Chemical Name 



CAS No. 



^iBfc 



Aor^'lamido 



Amitrol e 



Carbon totraohlorid e 



Chloroform 



Chromic acid 



Dim e thyl sulfat e 



Jim e tnyi sul 
2,Nitropropan e 



79 06 



61 8 2 5 



56 23 5 



67 66 3 



1333 82 



77 7 8 1 



0.03mg/m ^ TWA. Skin 
0.2 mg/m ^ T\^^\ 



2 ppm TWA 
2 ppm TWA 



0. 1 mg/m ^ Coiling 



-^r+- 



fff» 



T^VA, Skin 



Porchlorocthylcno 
o Toluidine 



79 46 9 



127 18 4 



95 53 4 



10 ppm TWA 
25 ppm T\VA 



5 ppm TWA, Skin 
2 ppm TWA, Skin 



p Toluidin e 



106 49 



Vinyl bromid e 

Vinyl oyolohcxenc dioxide 



593 60 2 



106 8 7 6 



5 ppm TWA 

10 ppm TWA, Skin. 



(B) Incorporation by reference of modified final rule for 29 CFR 1910.1200, Hazard Communication, including 
Appendices A through E, published in 59 FR (February 9, 1994) pages 6170 - 6184 except that 
1910. 1200(l5)(6)(ii) is amended to read: "(ii) Any hazardous substance as such term is defined by the 
Comprehensive Environmental Response, Compensation, and LiabiHty Act (CERCLA) (42 U.S.C. 9601 et seq), 
when regulated as a hazardous waste under that Act by the Environmental Protection Agency." 
(b) The parts of the Code of Federal Regulations adopted by reference in this Subchapter shall not automatically include 
any subsequent amendments thereto, except as follows: 

(1) Subpart H — Hazardous Materials: 

(A) Technical corrections at 1910. 109(g)(4)(v), Explosives and Blasting Agents, published in 58 FR (March 29, 
1993) page 16496 and effective on December 31, 1993. 

(B) Technical corrections at 1910. 1 10(d)(l 1), Storage and Handling of Liquefied Petroleum Gases, published in 
58 FR (March 19, 1993) page 15089 and effective on December 31, 1993. 

(C) Technical amendments to the existing Appendix B and addition of non-mandatory Appendix E to 1910.120, 
Hazardous waste operations and emergency response as published in 59 FR (August 22, 1994) pages 43270 - 
43280 and effective on November 1, 1994. 

(2) Subpart I — Personal Protective Equipment: 

(A) Addition of paragraphs (d), (e) and (f) to 1910.132 -General requirements; revisions to 1910.133 - Eye and face 
protection, 1910.135 - Head protection, 1910.136 - Foot protection; and addition of 1910.138 - Hand 
protection, including non-mandatory Appendices A and B, published in 59 FR (April 6, 1994) pages 16360 - 
16364 and effective on September 1, 1994; addition of paragraph (g) to 1910.132 - General requirements; 
technical and clarifying amendments to 1910.133 - Eye and face protection, 1910.136 - Foot protection, and 
1910.138 - Hand protection, as published in 59 FR (July 1, 1994) pages 33910 - 33911 and effective on 
September 1, 1994. 

(B) Revisions to 1910.137, Electrical Protective Equipment, published in 59 FR (January 31, 1994) pages 4435 - 
4437 and effective on November 1, 1994. 

(3) Subpart J -- General Environmental Controls — typographical and clarifying corrections at 1910.146, 
Permit-Required Confined Spaces, published in 58 FR (June 29, 1993) pages 34844 - 34851 and effective on 
September 24, 1993; a metric equivalent addition of "1.52 m" to 1910.146 (k) (3) (ii) and revisions to 
"Atmospheric monitoring" section of Appendix E as published in 59 FR (May 19, 1994) pages 26114 - 26116 
and effective on September 1, 1994; corrections are to final rule for Permit-Required Confined Spaces as 
originally published in 58 FR 4462 (January 14, 1993). 

(4) Subpart R - Special Industries: 

(A) Amendment to Authority Citation for Subpart R of 1910 as published in 59 FR (October 12, 1994) page 51741. 

(B) Amendments to 1910.266, Logging operations, including Appendices A, B, and C as published in 59 FR 
(October 12, 1994) pages 51741 - 51748 and effective on April 1, 1995. 

(C) Amendment to Electrical Protective Equipment at 1910.269(r)(5) that requires gasoline-engine power saw 



1822 



NORTH CAROLINA REGISTER 



November 15, 1995 10:16A 



PROPOSED RULES 



operations to also meet the requirements of 1910.266(e) as published in 59 FR (October 12, 1994) page 51748 
and effective on April 1, 1995. 

(5) Subpart S — Electrical — amendment to citation authority for Subpart S of 1910, and amendments to Notes 2 and 
3 for 1910.133(c)(1) and the Note for 1910.133(c)(3), published in 59 FR (January 31, 1994) pages 4475 - 4576 
and effective on November 1, 1994. 

(6) Subpart Z — Toxic and Hazardous Substances: 

(A) Revision of Authority Citation for Subpart Z of Part 1910 published in 59 FR (July 19, 1994) pages 36699 - 
36700 and effective on November 1, 1994. 

(B) Revocation of exposure Umits in "Final rule limits" columns of Table Z-l-A at 1910.1000, Air Contaminants, 
published in 58 FR (June 30, 1993) pages 35338 - 35351 and effective on September 24, 1993. 

(C) Correction to Table Z-3 Mineral Dust at 1910.1000, Air Contaminants, published in 58 FR (July 27, 1993) 
page 40191 and effective on December 31, 1993. 

(D) Typographical and technical corrections at 1910.1027, Cadmium, published in 58 FR (April 23, 1993) pages 
21778 - 21787 and effective on September 24, 1993; corrections are to final rule for Occupational Exposure 
to Cadmium as originally published in 57 FR 42101 (September 14, 1992). 

(E) Addition of 1910.1201 "Retention of DOT markings, placards, and labels," published in 59 FR (July 19, 1994) 
pages 36699 - 36700 and effective on November 1, 1994. 

(F) Final rule revisions to 1910.19(a), Special provisions for air contaminants, and revisions to 1910.1001, 
Asbestos, with amendments to Appendices A, B, D, F, G, and H and the addition of Appendix J, as published 
in 59 FR (August 10, 1994) pages 41057 - 41080; effective on February 1, 1995 with corresponding delayed 
effective dates as follows: 1910. 1001(o)(3)(i) is effective May 1, 1995; 1910.1001(o)(3)(ii) is effective May 
31, 1995; 1910.1001(o)(3)(iii) is effective May 1, 1995; 1910. 1001(o)(3)(iv) is effective October 31, 1995 
1910.1001(o)(3)(v) is effective July 31, 1995; 1910. 1001(o)(3)(vi) is effective May 1, 1995 
1910.1001(o)(3)(vii) is effective May 31, 1995; and 1910.1001(o)(3)(viii) is effective July 31, 1995 
typographical and technical corrections to 1910. 1(K)1 including corrections to Appendices B, F, G and J, 
published in 60 FR (June 29, 1995) pages 33984 - 33987. 

(c) Copies of the applicable Code of Federal Regulations sections referred to in this Subchapter are available to the public. 
Please refer to 13 NCAC 7A .0302 for the costs involved and from whom copies may be obtained. 



Statutory Authority G.S. 95-131; 95-133; 150B-21.6. 



»««««««*•*««*««««« 



N 



otice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Labor, Division of Occupational 
Safety and Health intends to amend rule cited as 13 NCAC 7F .0201. 



Proposed Effective Date: February 1, 1996. 

A Public Hearing will be conducted at 3:00 pm on December 5, 1995 at the NC Department of Labor/OSH, 319 Chapanoke 
Road. Suite 105, Raleigh, NC 27603-3432. 

Reason for Proposed Action: To make a conforming amendment to Subpart E, Personal Protective & Life Saving 
Equipment. 

Comment Procedures: Persons wishing to make an oral presentation at the public hearing should provide a written 
statement of the proposed testimony to the Division three business days prior to the hearing. Written comments will be 
accepted until December 15, 1995. Direct all correspondence and questions to Jill Cramer, 319 Chapanoke Road, Suite 105, 
Raleigh, NC 27603-3432. 

Fiscal Note: This Rule does not affect the expenditures or revenues of state or local government funds. 

CHAPTER 7 - OSHA 

SUBCHAPTER 7F - STANDARDS 

SECTION .0200 - CONSTRUCTION STANDARDS 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1823 



PROPOSED RULES 



.0201 CONSTRUCTION 

(a) The provisions for the Occupational Safety and Health Standards for Construction, Title 29 of the Code of Federal 
Regulations Part 1926 as of August 2, 1993, are incorporated by reference except as follows: 

(1) Subpart C - General Safety and Health Provisions — Personal protective equipment, §1926. 28(a) is amended to 
read as follows: "(a) The employer is responsible for requiring the wearing of appropriate personal protective 
equipment in all operations where there is an exposure to hazardous conditions or where this part indicates the 
need for using such equipment to reduce the hazards to the employees." 

(2) Subpart D — Occupational Health and Environmental Controls: 

(A) Addition to 29 CFR 1926.54, Nonionizing radiation, after subpart (a) to read: 

"(al) This standard shall apply to all direct or reflected laser equipment except properly maintained unmodified 
Class I equipment. Class I equipment is defined as intrinsically safe lasers having less than 0.001 milliwatt 
power and lasers which cannot create eye damage if viewed accidentally or which present no direct ocular 
hazard, diffuse ocular hazard or fire hazards." 

(B) Incorporation by reference of modified final rule for 29 CFR 1926.59, Hazard Communication, including 
Appendices A through E, published in 59 FR (February 9, 1994) pages 6170 - 6184 except that 
1926.59(b)(6)(ii) is amended to read: 

"(ii) Any hazardous substance as such term is defined by the Comprehensive Environmental Response, 
Compensation, and Liability Act (CERCLA) (42 U.S.C. 9601 et seq), when regulated as a hazardous waste 
under that Act by the Environmental Protection Agency;" 

(3) Subpart E -Personal Protective and Life Saving Equipment — addition of £gj to 1926.104 Safety belts, lifelines, 
and lanyards, as follows: 

"(g) Snaphooks shall be a locking type designed and used to prevent disengagement of the snaphook keeper 
by the connected member. Locking type snaphooks have self-closing, self-locking keepers which remain 
closed and locked until unlocked and pressed open for cormection or disconnection." 

(4) (3) Subpart Z — Toxic and Hazardous Substances — incorporation of the existing standard for Bloodbome 
Pathogens, 29 Cm 1910.1030, excluding subparagraph (e) HTV and HBV Research Laboratories and Production 
Facilities, into the Safety & Health Regulations for Construction at 29 CFR 1926.1130. Final rule as published 
in 56 FR (December 6, 1991) pages 64175 - 64182, including Appendix A — Hepatitis B Vaccine Declination 
(Mandatory) — with corrections as published in 57 FR (July 1, 1992) page 29206, and with the following revision 
to the definition of Occupational Exposure under subsection (b) Definitions: 

"Occupational Exposure means reasonably anticipated skin, eye, mucous membrane, or parenteral contact with 
blood or other pnatentially infectious materials that may result from the performance of collateral first aid duties 
by an employee in the areas of construction, alteration, or repair, including painting and decorating." 

(b) The parts of the Code of Federal Regulations incorporated by reference in this Subchapter shall not automatically 
include any subsequent amendments thereto, except as follows: 

(1) IncorpxDration of existing General Industry Standards (Part 1910) applicable to construction work into the Safety 
& Health Regulations for Construction (Part 1926). Final rule as published in 58 FR (June 30, 1993) pages 
35076 - 35311 and effective on December 1, 1993; correction to Appendix D to §1926.1147 as published in 58 
FR (July 28, 1993) page 40468 and effective on December 31, 1993. The General Industry Standards which are 
applicable to the Construction Standards are as follows: 
Subpart C — General Safety and Health Provisions, 

1926.33 Access to employee exposure and medical records. 

1926.34 Means of egress. 

1926.35 Employee emergency action plans. 
Subpart D — Occupational Health and Environmental Control, 

1926.64 Process safety management of highly hazardous chemicals. 

1926.65 Hazardous waste operations and emergency response. 

1926.66 Criteria for design and construction for spray booths. 
Subpart E — Personal Protective Equipment and Life Saving Equipment, 

1926.95 Criteria for personal protective equipment. 

1926.96 Occupational foot protection. 

1926.97 Protective clothing for fire brigades. 

1926.98 Respiratory protection for fire brigades. 
Subpart F — Fire Protection and Prevention, 

Fixed Fire Suppression Equipment 

1926.156 Fire extinguishing systems, general. 

1926.157 Fire extinguishing systems, gaseous agent. 



1824 NORTH CAROLINA REGISTER November 15, 1995 10:16A 



PROPOSED RULES 



^ 



Other Fire Protection Systems 

1926.158 Fire detection systems. 

1926.159 Employee alarm systems. 
Subpart I — Tools - Hand and Power, 

1926.306 Air receivers. 

1926.307 Mechanical power-transmission apparatus. 
Subpart L — Scaffolding, 

1926.453 Manually propelled mobile ladder stands and scaffolds (towers). 
Subpart Y — Commercial Diving Operations, 
General 

1926.1071 Scope and application. 

1926.1072 Definitions. 
Personnel Requirements 

1926.1076 Qualifications of dive team. 
General Operations Procedures 

1926.1080 Safe practices manual. 

1926.1081 Pre-dive procedures. 

1926.1082 Procedures during dive. 

1926.1083 Post-dive procedures 
Specific Operations Procedures 

1926.1084 SCUBA diving 

1926.1085 Surface-supplied air diving 

1926.1086 Mixed-gas diving. 

1926.1087 Liveboating. 

Equipment Procedures and Requirements 

1926.1090 Equipment. 
Recordkeeping 

1926.1091 Recordkeeping requirements. 



^ 1926.1092 Effective date. 



) 



Appendix A to Subpart Y - Examples of Conditions Which May Restrict or Limit Exposure to Hyperbaric 
Conditions. 

Appendix B to Subpart Y - Guidelines for Scientific Diving. 
Subpart Z ~ Toxic and Hazardous Substances 
1926.1100-1926.1101 [Reserved]. 

1926.1102 Coal tar pitch volatiles; interpretation of term. 

1926.1103 4-Nitrobiphenyl. 

1 926 . 1 1 04 alpha-Naphthylamine. 

1926.1105 [Reserved]. 

1926.1106 Methyl chloromethyl ether. 

1926.1107 3,3'-Dichlorobenzidine [and its salts]. 

1926.1108 bis-Chloromethyl ether. 

1926.1109 beta-Naphthylamine. 

1926.1110 Benzidine. 

1 926 .1111 4-Aminodiphenyl . 

1926.1112 Ethyleneimine. 

1 926 . 1 1 1 3 beta-Propiolactone. 

1 926 .1114 2- Acety laminofluorene. 

1926. 1115 4-DimethyIaminoazobenzene. 

1926.1116 N-Nitrosodimethylamine. 

1926.1117 Vinyl chloride. 

1926.1118 Inorganic arsenic. 

1926.1128 Benzene. 

1926.1129 Coke emissions. 

1926. 1 144 1 ,2-dibromo-3-chloropropane. 

1926.1145 Acrylonitrile. 

1926.1147 Ethylene oxide. 

1926.1148 Formaldehyde. 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1825 



PROPOSED RULES 



Appendix A to Part 1926. Designations for General Industry Standards Incorporated Into Body 
of Construction Standards. 

(2) Subpart D — Occupational Health and Environmental Controls: 

(A) Revision of Authority Citation for Subpart D of Part 1926 published in 59 ¥R (July 19, 1994) pages 36699 - 
36700 and effective on November 1, 1994. 

(B) Addition of 1926.61 "Retention of DOT markings, placards, and labels." published in 59 FR (July 19. 1994) 
pages 36699 - 36700 and effective on November 1, 1994. 

(C) 29 CFR 1926.62, Lead in Construction. Interim final rule and appendices A through D as published in 58 FR 
(May 4, 1993) pages 26627-26649 and effective on October 4, 1993. 

(D) Typographical and technical corrections at 1926.63, Cadmium, published in 58 ¥K (April 23, 1993) pages 
21778 - 21780 and 21787 and effective on September 24, 1993; corrections are to fmal rule for Occupational 
Exposure to Cadmium as originally published in 57 FR 42101 (September 14, 1992). 

(E) Technical amendments to the existing Appendix B and addition of non-mandatory Appendix E to 1926.65, 
Hazardous Waste Operations and Emergency Response as pubUshed in 59 FR (August 22, 1994) pages 43270 - 
43280 and effective on November 1, 1994. 

(3) Subpart E — Personal Protective and Life Saving Equipment — revision of Authority Citation for Subpart E of 
Part 1926 as published in 59 FR (August 9, 1994) page 40729 and effective on February 6, 1995. 

(4) Subpart H — Materials Handling, Storage, Use and Disposal — revision of Authority Citation for Subpart 
H of Part 1926, and revision of 1926.250Cb)(2) as published in 59 FR (August 9, 1994) pages 40729 - 
40730 and effective on February 6, 1995. 

(5) Subpart M — Fall Protection — revision of Authority Citation for Subpart M of Part 1926 and replacement of 
Subpart M with 1926.500, 1926.501, 1926.502, 1926.503 and non-mandatory Appendices A through E as 
published in 59 FR (August 9, 1994) pages 40730 - 40753 and effective on Februar>- 6, 1995, with the 
requirement for the use of locking snaphooks under 29 CFR 1926.500(b) [definition for Snaphook], 
1926.502(d)(5), 1926.502(e)(7) and Appendix C, Part II(j)(l) having an effective date of July 1, 1995; 
amendments to 1926.500(a)(2)(iii), 1926.500(a)(3)(iv) and 1926.500(a)(4) that eliminate the application of Subpart 
M to steel erection activities as published in 60 FR (August 2, 1995) page 39255 and effective on October 1, 
1995. 

(6) Subpart N — Cranes, Derricks, Hoists, Elevators, and Conveyors — revision of Authority Citation for Subpart 
N of Part 1926, and revision of 1926.550(c)(2) and 1926.550(g)(4)(i)(C) as published in 59 FR (August 9, 1994) 
page 40730 and effective on Februan.- 6, 1995. 

(7) Subpart P — Excavations — revision of Authority' Citation for Subpart P of Part 1926, revision of section heading 
of 1926.651, Specific excavation requirements, and revision of 1926.651(1) as published in 59 FR (August 9, 
1994) page 40730 and effective on Februan," 6, 1995. 

(8) Subpart Q — Concrete and Masonry — revision of Authority Citation for Subpart Q of Part 1926, removal of 
1926.701(f)(2) and removal of subparagraph designation (1) of 1926.701(f) as published in 59 FR (August 9, 
1994) page 40730 and effective on Februar)' 6, 1995. 

(9) Subpart R — Steel Erection — revision of Authority' Citation for Subpart R of Part 1926 as published in 59 FR 
(August 9, 1994) page 40730 and effective on February 6, 1995. 

(10) Subpart V — Power Transmission and Distribution — revision of Authoritv' Citation for Subpart V of Part 1926, 
and revision of 1926.95 l(TD)(4)(i) as pubUshed in 59 FR (August 9, 1994) page 40730 and effective on February 
6, 1995. 

(11) Subpart Z — Toxic and Hazardous Substances: 

(A) Correction to 29 CFR 1926 by adding text and redesignation for Cadmium as published in 59 FR (Januarj' 3, 
1994) page 215 and effective on April 15, 1994. 

(B) Final rule redesignation of 1926.58 to 1926.1101, and revision of 1926.1101, Asbestos, including amendments 
to Appendix A, Appendix B, Appendix D, and Appendix F, remo\al of Appendix G, and amendments to 
Appendix H, Appendix I, and Appendix K, as published in 59 FR (August 10, 1994) pages 41131 - 41162; 
effective on Februarv' 1, 1995 with corresponding delayed effective dates as follows: 1926.1 101(q)(3)(i) is 
effective July 31, 1995; 1926. 1 101(q)(3)(ii) is effective May 31, 1995; 1926. 1 101(q)(3)(iii) is effective May 
31, 1995; 1926.1101(q)(3)(iv) is effective July 31, 1995; 1926. 1 101(q)(3)(v) is effective May 1, 1995; 
1926.1101(q)(3)(vi) is effective May 1, 1995; and 1926. 1 101(q)(3)(vii) is effective July 31, 1995; tj'pographical 
and technical corrections to 1926.1101 including corrections to Appendices B, F, H, and K, published in 60 
FR (June 29, 1995) pages 33995 - 34002 and in 60 FR (July 13, 1995) page 36044. 

(c) Copies of the applicable Code of Federal Regulations sections referred to in this Subchapter are available for public 
inspection at the North Carolina Department of Labor, Di\ision of Occupational Safety and Health. A single copy may be 
obtained from the Division at a cost of ten dollars and sixt)' cents ($10.60) (inclusive of tax); each additional copy will be 



1826 XORTH CAROLLXA REGISTER November 15, 1995 10:16A 



PROPOSED RULES 



the same price. 

Statutory Authority G.S. 95-131; 150B-21.6. 



««*««««««**««««««» 



Notice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Labor intends to adopt /amend rules 
in 13 NCAC 15 that govern elevators and amusement devices. The agency will subsequently publish in the Register the 
text of the rule(s) it proposes to adopt as a result of the public hearing and of any comments received on the subject matter. 

Proposed Effective Date: April 1, 1996. 

A Public Hearing will be conducted at 2:00 pm on December 15, 1995 at the NC Department of Labor, 319 Chapanoke 
Road, Conference Room A, Raleigh, NC. 

Reason for Proposed Action: To update the administrative rules regarding elevators and amusement devices. 

Comment Procedures: Please submit your comments to Mr. Scott Templeton, APA Coordinator, NC Dept of Labor, 4 W. 
Edenton Street, Raleigh, NC 27601, FAX (919) 715-5629; Telephone (919) 733-0368 by December 15, 1995. You may 
present written or oral comments at the hearing; time limits may be imposed by the Chair. 



10:16A NORTH CAROLINA REGISTER November 15, 1995 1827 



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